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To develop a new compound in view of the anticipated shortage of raw material currently being used in one of the company's processes. Sufficient progress has been made to suggest that new compound can be produced at a cost comparable to that of the existing raw material. Project BX To improve the yield of an important manufacturing operation of the company. At present material input with a cost of RM 100,000 p.a becomes contaminated in the operation and half is wasted. Sufficient progress has been made for the scientists to predict an improvement so that only 20% will be wasted. The directors of Happy Ltd consider both projects will be successful. In addition, the company has enough finances to complete both projects and enough capacity to see both projects through to successful conclusion. Cost incurred during the year were: Project Sta salaries Overhead (direct cost) Plant on cost (life 10 years) AX RM ,000 26,000 20,000 BX RM 10,000 12,000 60,000 Required: In relation to MFRS138 Intangible Assets, (a) Define (i) (ii) Research and Development (b) Say under what circumstances it would be appropriate to defer development (capitalize) To develop a new compound in view of the anticipated shortage of raw material currently being used in one of the company's processes. Sufficient progress has been made to suggest that new compound can be produced at a cost comparable to that of the existing raw material. Project BX To improve the yield of an important manufacturing operation of the company. At present material input with a cost of RM 100,000 p.a becomes contaminated in the operation and half is wasted. Sufficient progress has been made for the scientists to predict an improvement so that only 20% will be wasted. The directors of Happy Ltd consider both projects will be successful. In addition, the company has enough finances to complete both projects and enough capacity to see both projects through to successful conclusion. Cost incurred during the year were: Project Sta salaries Overhead (direct cost) Plant on cost (life 10 years) AX RM ,000 26,000 20,000 BX RM 10,000 12,000 60,000 Required: In relation to MFRS138 Intangible Assets, (a) Define (i) (ii) Research and Development (b) Say under what circumstances it would be appropriate to defer development (capitalize)

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