Rive Rouge Confections Company incurred €5,000,000 to determine if chocolate could be made to resist melting by adding certain inert minerals to the mixture. According to IAS 38,how should Rive Rouge record this cost?

Question

Quizplus · Accepted Answer

According to IAS 38, research costs should be expensed currently as they are not likely to result in future economic benefits. The cost incurred by Rive Rouge to determine if chocolate could be made to resist melting falls under the category of research costs as it is uncertain whether this will lead to future economic benefits. Therefore, the cost should be expensed currently. Choices A, B, and D are incorrect as they all suggest capitalizing the cost, which is not appropriate according to IAS 38 for research costs.

Rive Rouge Confections Company Incurred €5,000,000 to Determine If Chocolate