Research & Development Costs Expensed/Capitalized

CFA Level I FRA
#1

So up until now I thought that for GAAP, R&D was expensed until technological feasibility had been established, at which point development related costs could be capitalized. For IFRS, research costs were expensed and development costs could be capitalized, nothing more, nothing less, pretty straight forward. Now, I am going over one of the CFAI mock exams and its giving me conflicting information.

Question: A company that prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) is attempting to produce lighter and longer-lasting batteries for portable electronic devices. The most appropriate accounting treatment for the related costs incurred in this project is to:

A. expense them as incurred.

B. expense costs until technical feasibility has been established.

C. capitalize costs directly related to the development.

Explanation: Under IFRS, research and development costs are expensed until certain criteria are met, including that technical feasibility has been established and the company intends to use the developed product.

I answered “C” which apparently is incorrect. But going off the definition given in the Schweser books for “Research and Development Costs” this is the correct answer. Is something wrong or am I looking at this incorrectly?

#2

IFRS and GAAP are the same in treating of RESEARCH cost. This cost will be expensed as incur.

For IFRS, you can start capitalize DEVELOPMENT expense if technological feasibility had been established.

For GAAP, DEVELOPMENT cost will be expensed as incur. However, there is EXCEPTION for software company.

Therefore, B should be the correct answer.