Research and Development at Thomas Company

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The Thomas Company is in the process of developing a revolutionary
new product. A new division of the company was formed to develop,
manufacture, and market this product. As of the end of the year December
31, 2010, the product has not been manufactured for resale; however,
the prototype unit was built and is in operation. Throughout 2010, the
division incurred certain costs including design and engineering
studies, prototype manufacturing costs, administration expenses
(including salaries of administrative personnel), and market research
costs. In addition, $500,000 in equipment (estimated useful life of 10
years) was purchased for use in developing and manufacturing the
preproduction prototype and will be used to manufacture the product.
Approximately $200,000 of this equipment was built specifically for the
design and development of the product; the remaining $300,000 of
equipment will be used to manufacture a product once it is in commercial
production.

Required: In the U.S. (SFAS No. 2), development
costs are expensed but under the IFRS (IAS 38), many development costs
are capitalized. Judge and support which treatment adheres best to the
matching principle, basic to the conceptual frameworks of both U.S. GAAP
and IFRS.

Your well-written paper must be 2-3 pages, in addition to title and
reference pages. The paper should be formatted according to APA REQUIREMENTS Cite at least two peer-reviewed sources, in addition to the required reading for the module.

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