Answer in just 200 words please.Case StudyAs a professional accountant, you work for Optimistic...Answer...

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Accounting

Answer in just 200 words please.
Case Study
As a professional accountant, you work for Optimistic Ltd.Optimistic Ltd was incorporated with the objective of developingdesigner drugs to meet the needs of an ageing population. Inreviewing the company’s draft financial statements for the yearended 30 June 2017, you detected the following:
Your manager has capitalised $1,000,000 of research expenditureas research and development. This expenditure is clearly “research”as per the definition in AASB138
As per AASB 138:
No intangible asset arising from research (or from the researchphase of an internal project) shall be recognised. Expenditure onresearch (or on the research phase of an internal project) shall berecognised as an expense when it is incurred. In the research phaseof an internal project, an entity cannot demonstrate that anintangible asset exists that will generate probable future economicbenefits. Therefore, this expenditure is recognised as an expensewhen it is incurred. Therefore this type of expenditure is to beexpensed immediately as per the requirements of AASB 138 IntangibleAssets.
• If this research expenditure had been recorded as per therequirements of AASB 138, the company would have made a loss of$500,000.
• You are also aware that your manager stands to receive agenerous bonus for meeting prescribed profit targets.
QUESTION:
In your capacity as a professional accountant, how wouldyou personally handle this situation – what would be your firststep, second step, etc?
In your response, consider the Code of Ethics for ProfessionalAccountants and how you intend to resolve the situation.

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4.1 Ratings (796 Votes)

Since the professional accountant is bound to act with integrity and honesty I would take necessary measures to ensure that the incorrect accounting of the research expense is corrected by bringing it to the notice of those charged with governance The See Answer

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In: AccountingAnswer in just 200 words please.Case StudyAs a professional accountant, you work for Optimistic...Answer in just 200 words please.Case StudyAs a professional accountant, you work for Optimistic Ltd.Optimistic Ltd was incorporated with the objective of developingdesigner drugs to meet the needs of an ageing population. Inreviewing the company’s draft financial statements for the yearended 30 June 2017, you detected the following:Your manager has capitalised $1,000,000 of research expenditureas research and development. This expenditure is clearly “research”as per the definition in AASB138As per AASB 138:No intangible asset arising from research (or from the researchphase of an internal project) shall be recognised. Expenditure onresearch (or on the research phase of an internal project) shall berecognised as an expense when it is incurred. In the research phaseof an internal project, an entity cannot demonstrate that anintangible asset exists that will generate probable future economicbenefits. Therefore, this expenditure is recognised as an expensewhen it is incurred. Therefore this type of expenditure is to beexpensed immediately as per the requirements of AASB 138 IntangibleAssets.• If this research expenditure had been recorded as per therequirements of AASB 138, the company would have made a loss of$500,000.• You are also aware that your manager stands to receive agenerous bonus for meeting prescribed profit targets.QUESTION:In your capacity as a professional accountant, how wouldyou personally handle this situation – what would be your firststep, second step, etc?In your response, consider the Code of Ethics for ProfessionalAccountants and how you intend to resolve the situation.