Agro-World Technologies Inc.incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)?
A)research
B)development
C)neither research nor development
D)It could be either research or development,depending on management's wishes.

Question

Quizplus · Accepted Answer

The cost incurred to construct a pilot plant for studying the feasibility of building agricultural machinery more inexpensively for emerging economies would fall under the category of development under IAS 38. Development refers to the application of research findings or other knowledge in order to improve or develop new products, services, or processes. As the pilot plant is constructed to test the feasibility of building machinery, it falls under the category of development.