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Financial Accounting

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Financial Accouting

EXECUTIVE SUMMARY

Accounting for intangible assets is a major issue within the accounting environment. The issue is identifiable when it concerns accounting for research and development costs, in particular, internally generated assets. With two imperative standards in practice today, one being the IASB’s selective capitalisation of expenses into an intangible asset once a specific criteria has been reached and the other being the FASB’s system of straight expensing of all expenditure.

This subject plays a vital role in the accounting world due to the large amount of money invested into research and development activities, with the Australian Bureau of Statistics 2010 reporting that Business expenditure on R&D (BERD) in Australia alone increased 15% to $14, 380 million up from 07-08.

In discussing the different styles taken by the Boards it is easier to identify the impact these standards have on a corporation and its performance, with particular reference being made to Clinuvel Pharmaceuticals Limited, an Australian listed company that is currently undertaking research and development to develop a UV medical protection of the skin from UV and light for sun-related ailments.

1. Clinuvel Activities of R&D

Clinuvel Pharmaceuticals Limited (CUV) is a listed Australian biopharmaceutical company based in Melbourne. The focus of CUV is to further research and develop, and eventually commercialise, its leading drug candidate afamelanotide as “a preventative treatment for a range of UV-related skin disorders as well as in cancer related treatments” (Clinuvel Newsletter May, 2010). The report (Clinuvel Pharmaceuticals Ltd 2009) states that the drug attempts to provide medical protection from the skin “against UV radiation (UVR) as it stimulates the body’s natural ability to produce eumelanin, the dark pigment of the skin which is known to...

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