Services Ltd incurred research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the...

Services Ltd incurred research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the project. Total costs in the research phase are $6 million, and in the development phase total costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product A was brought to market in Year 2019 and is expected to be marketable for five years. Total sales of Product A are estimated at more than $100 million.

Required:

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  Explain the research and development expenditure related regulations of IAS and US GAAP.
  
  


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  Determine the impact research and development costs have on Services Ltd in 2018 and 2019 income under (1) IFRS and (2) U.S. GAAP.
  
  


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  Summarize the difference in income, total assets, and total shareholders’ equity related to Product A over its five-year life under the two different sets of accounting rules.