What Is the Test for Deferral of Research Costs as Required

question 22

Multiple Choice

What is the test for deferral of research costs as required by AASB 138?

• A) Research costs can be deferred (recorded as an asset) when it is probable that the project they are applied to will bring future economic benefits.
• B) Research costs may not be deferred unless it is almost certain that the project they are applied to will bring future economic benefits.
• C) Research costs may not be recorded as an intangible asset.
• D) Research costs may be deferred if the entity can demonstrate that an intangible asset exists and that it will generate future economic benefits.

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Definitions:

Variable Cost

A cost that varies with the level of output or sales, such as materials or commissioned labor.

Fixed Cost

A cost that does not vary with the level of output or sales over a certain period, such as rent or salaries.

Break-even Point

The point at which total costs and total revenue are equal, meaning no profit or loss is made, illustrating the minimum sales volume needed to cover fixed and variable costs.

Sales Mix

Sales mix refers to the proportion of different products or services sold by a company, influencing decisions on pricing, marketing, and production.