问答题 Klancet, a public limited company, is a pharmaceutical company and is seeking advice on several financial reporting issues.
问答题 (a)Klancet produces and sells its range of drugs through three separate divisions. In addition, there are two laboratories which carry out research and development activities. In the first of these laboratories, the research and development activity is funded internally and centrally for eachof the three sales divisions. It does not carry out research and development activities for other entities. Each ofthe three divisions is given a budget allocation which it uses to purchase research and development activitiesfrom the laboratory. The laboratory is directly accountable to the division heads for this expenditure. The second laboratory performs contract investigation activities for other laboratories and pharmaceuticalcompanies. This laboratory earns 75% of its revenues from external customers and these external revenuesrepresent 18% of the organisation’s total revenues. The performance of the second laboratory’s activities and of the three separate divisions is regularly reviewed bythe chief operating decision maker (CODM). In addition to the heads of divisions, there is a head of the secondlaboratory. The head of the second laboratory is directly accountable to the CODM and they discuss the operatingactivities, allocation of resources and financial results of the laboratory. Klancet is uncertain as to whether the research and development laboratories should be reported as two separatesegments under IFRS 8 Operating Segments, and would like advice on this issue.(8 marks)
【正确答案】IFRS 8 Operating Segmentsstates that an operating segment is a component of an entity which engages in business activitiesfrom which it may earn revenues and incur costs. In addition, discrete financial information should be available for thesegment and these results should be regularly reviewed by the entity’s chief operating decision maker (CODM) when makingdecisions about resource allocation to the segment and assessing its performance. However, if a function is an integral partof the business, it may be disclosed as a segment even though it may not earn revenue. Other factors should be taken into account when identifying the operating segments. These include the nature of the businessactivities of each component, the existence of managers responsible for them, and information presented to the board ofdirectors. IFRS 8 also has certain quantitative measures to identify a segment, although an entity can report segment information forsmaller operating segments if there is a belief that the information is useful. According to IFRS 8, an operating segment is one which meets any of the following quantitative thresholds: (a)Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more ofthe combined revenue, internal and external, of all operating segments. (b) The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of (i) the combinedreported profit of all operating segments which did not report a loss and (ii) the combined reported loss of all operatingsegments which reported a loss. (c) Its assets are 10% or more of the combined assets of all operating segments. As regards the two research and development laboratories, qualitative and quantitative factors should be considered indetermining the operating segments. The qualitative factors will include whether the resultant operating segments areconsistent with the principles of IFRS 8, whether the operating segments represent the level at which the CODM is assessingperformance and allocating resources and whether the identified operating segments enable users of its financial statementsto evaluate its activities and financial performance, and the business environment it operates in. As a result of the application of the above criteria, the first laboratory will not be reported as a separate operating segment.The divisions have heads directly accountable to, and maintaining regular contact with, the CODM to discuss all aspects oftheir division’s performance. The divisions seem to be consistent with the core principle of IFRS 8 and should be reported asseparate segments. The laboratory does not have a separate segment manager and the existence of a segment manager isnormally an important factor in determining operating segments. Instead, the laboratory is responsible to the divisionsthemselves, which would seem to indicate that it is simply supporting the existing divisions and not a separate segment.Additionally, there does not seem to be any discrete performance information for the segment, which is reviewed by theCODM. The second laboratory should be reported as a separate segment. It meets the quantitative threshold for percentage of totalrevenues and it meets other criteria for an operating segment. It engages in activities which earn revenues and incurs costs,its operating results are reviewed by the CODM and discrete information is available for the laboratory’s activities. Finally, ithas a separate segment manager.
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问答题 (b)Klancet has agreed to sell a patent right to another pharmaceutical group, Jancy. Jancy would like to use thepatent to develop a more complex drug. Klancet will receive publicly listed shares of the Jancy group in exchangefor the right. The value of the listed shares represents the fair value of the patent. If Jancy is successful indeveloping a drug and bringing it to the market, Klancet will also receive a 5% royalty on all sales. Additionally, Klancet won a competitive bidding arrangement to acquire a patent. The purchase price was settledby Klancet issuing new publicly listed shares of its own. Klancet’s management would like advice on how to account for the above transactions.(7 marks)
【正确答案】All equity investments in the scope of IFRS 9 Financial Instrumentsare to be measured at fair value in the statement offinancial position, with value changes recognised in profit or loss, except for those equity investments for which the entity haselected to report value changes in ‘other comprehensive income’. If an equity investment is not held for trading, an entity canmake an irrevocable election at initial recognition to measure it at fair value through other comprehensive income with onlydividend income recognised in profit or loss. Despite the fair value requirement for all equity investments, IFRS 9 containsguidance on when cost may be the best estimate of fair value and also when it might not be representative of fair value. IFRS 13 Fair Value Measurement defines fair value in this case which would be the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Klancet would use level 1 inputs in this case, which are quoted prices in active markets. Klancet’s management should initially recognise the shares received at their fair value and should also derecognise the patent which is transferred to Jancy. Any gain or loss should also be recognised. The fair value of the shares received represents theamount of the consideration received according to IAS 18 Revenue. Revenue from royalties will be recognised on an accrualbasis in accordance with the substance of the relevant agreement (IAS 18). As such, Klancet should not yet recognise anyasset relating to the future royalty stream from the potential sales of the drug, because this stream of royalties is contingentupon the successful development of the drug. With regards to the purchase of the patent, this is an equity settled, share-based payment transaction. The rules from IFRS 2 Share-based Paymentshould be used.The entity should measure the goods purchased at the fair value of the goodsreceived, unless that fair value cannot be estimated reliably. If Klancet cannot estimate reliably the fair value of the goodsreceived, it should measure the value by reference to the fair value of the equity instruments granted. Klancet should recognisethe patent at its fair value. The best indicator of fair value is the publicly traded price of the shares on the acquisition date.
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问答题 (c)Klancet is collaborating with Retto Laboratories (Retto), a third party, to develop two existing drugs owned by Klancet. In the case of the first drug, Retto is simply developing the drug for Klancet without taking any risks during thedevelopment phase and will have no further involvement if regulatory approval is given. Regulatory approval hasbeen refused for this drug in the past. Klancet will retain ownership of patent rights attached to the drug. Rettois not involved in the marketing and production of the drug. Klancet has agreed to make two non-refundablepayments to Retto of $4 million on the signing of the agreement and $6 million on successful completion of thedevelopment. Klancet and Retto have entered into a second collaboration agreement in which Klancet will pay Retto fordeveloping and manufacturing an existing drug. The existing drug already has regulatory approval. The new drugbeing developed by Retto for Klancet will not differ substantially from the existing drug. Klancet will have exclusivemarketing rights to the drug if the regulatory authorities approve it. Historically, in this jurisdiction, new drugsreceive approval if they do not differ substantially from an existing approved drug. The contract terms require Klancet to pay an upfront payment on signing of the contract, a payment on securingfinal regulatory approval, and a unit payment of $10 per unit, which equals the estimated cost plus a profitmargin, once commercial production begins. The cost-plus profit margin is consistent with Klancet’s otherrecently negotiated supply arrangements for similar drugs. Klancet would like to know how to deal with the above contracts with Retto. (8 marks) Required: Advise Klancet on how the above transactions should be dealt with in its financial statements with reference to relevant International Financial Reporting Standards. Note: The mark allocation is shown against each of the three issues above. Professional marks will be awarded in question 3 for clarity and quality of presentation.(2 marks)
【正确答案】IAS 38 Intangible Assetsrequires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if,and only if, it is probable that the future economic benefits which are attributable to the asset will flow to the entity; and thecost of the asset can be measured reliably. This requirement applies whether an intangible asset is acquired externally orgenerated internally. IAS 38 includes additional recognition criteria for internally generated intangible assets. Developmentcosts are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. Thismeans that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able todemonstrate how the asset will generate future economic benefits. If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the developmentphase, the entity treats the expenditure for that project as if it were incurred in the research phase only. The price which anentity pays to acquire an intangible asset reflects its expectations about the probability that the expected future economicbenefits in the asset will flow to the entity. The effect of probability is reflected in the cost of the asset and the probabilityrecognition criterion above is always considered to be satisfied for separately acquired intangible assets. The cost of aseparately acquired intangible asset can usually be measured reliably. This is particularly so when the purchase considerationis in the form of cash or other monetary assets. The cost of a separately acquired intangible asset comprises its purchaseprice and any directly attributable cost of preparing the asset for its intended use. In the case of the first project, Klancet owns the potential new drug, and Retto is carrying out the development of the drugon its behalf. The risks and rewards of ownership remain with Klancet. By paying the initial fee and the subsequent paymentto Retto, Klancet does not acquire a separate intangible asset, which could be capitalised. The payments represent researchand development by a third party, which need to be expensed over the development period provided that the recognitioncriteria for internally generated intangible assets are not met. Development costs are capitalised only after technical andcommercial feasibility of the asset for sale or use have been established. This means that the entity must intend and be ableto complete the intangible asset and either uses it or sells it and be able to demonstrate how the asset will generate futureeconomic benefits. At present, this criterion does not appear to have been met as regulatory authority for the use of the drughas not been given, and in fact, approval has been refused in the past. In the case of the second project, the drug has already been discovered and therefore the costs are for the development andmanufacture of the drug and its slight modification. There is no indication that the agreed prices for the various elements arenot at fair value. In particular, the terms for product supply at cost plus profit are consistent with Klancet’s other supplyarrangements. Therefore, Klancet should capitalise the upfront purchase of the drug and subsequent payments as incurred,and consider impairment at each financial reporting date. Regulatory approval has already been attained for the existing drugand therefore there is no reason to expect that this will not be given for the new drug. Amortisation should begin onceregulatory approval has been obtained. Costs for the products have to be accounted for as inventory using IAS 2 Inventoriesand then expensed as costs of goods sold as incurred.
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