Make a outline the accounting issues

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Entity 5 is a software development with special expertise in inventory management. It carries out research and development activities every year. Some of the findings from these activities can be further developed into customised software for specific customer needs.

On 1 January 2019, it entered into a contract with a customer to provide an inventory control system. According to the terms of the contract, Entity 5 would be providing technical support to this customer on how to run the system. Modification and further development to this system would be carried throughout the terms of the contract whenever such needs arise.

The contract lasts for 5 years and the customer will pay an initial fee, followed by a monthly payment until the contract expires.

Required:

Question 1: Outline the accounting issues that Entity 5 would need to deal with from its research and development activities and the contracts with customers in accordance with IAS 38 Intangibles and IFRS 15 Revenue from Contracts with Customers.

Reference no: EM132546086

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