Attributable Overhead Expenditure Assignment | Top Universities

Jaguar Land Rover PLC Jaguar Land Rover Automotive PLC (JLR) is a maker of luxury autos based in the Coventry United Kingdom. JLR uses IFRS and has a fiscal year-end of March 31. You have been asked to use your knowledge of IFRS to convert key metrics for the company to a U.S. GAAP basis. For simplicity, you may assume that the only material differences between JLR's as-reported numbers and those it would report under U.S. GAAP are traceable to its policy of capitalizing development costs. Internally Generated Intangible Assets (from Footnote 2, Accounting Policies) Research costs are charged to the consolidated income statement in the year in which they are incurred, Product development costs incurred on new vehicle platforms, engines, transmission and new products listed, the Group has committed technical, financial and other resources to development and it is probable that the asset will generate future economic benefits.

The costs capitalized include the cost of materials, direct labor and directly attributable overhead expenditure incurred up to the date the asset is available for use. Interest cost incurred is capitalized up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset. Product development cost is amortized over a period of between two and ten years. Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment loss if any. Amortisation is not recorded on product development in progress until development is complete. recognized as intangible assets-when feasibility has been tested- complete the are Research and Development (from Footnote 11) cea -S IGIGO 2017 (E millions) Year ended 31 March 1,794 (368) 1,426 Total research and development costs incurred Research and development expensed Development costs capitalized apter Four Intangible Assets (selections from Footnote 18) Capitalized Product Development (E millions) Product Development in Progress (E millions) Cost 4,525 1,539 Balance at 31 March 2016 1,426 Additions-internally developed 809 (138) 5,196 (809) Transfers Disposals Balance at 31 March 2017 2,156 Amortization 1,635 Balance at 31 March 2016 769 (138) 2,266 2,930 Amortization for the year Disposals Balance at 31 March 2017 2,156 Netbook value at 31 March 2017 Required: 1. What percentage of R&D expenditures were capitalized during the fiscal year ending March 31, 2017? How does this percentage compare with the capitalization ratios of the German automakers profiled in Exhibit 4.4? 2. Estimate the average useful life of product development costs by dividing average capitalized product development Compute average capitalized product development costs as simple average balances at the beginning and end of each fiscal year. Does your estimate fall within the range of the useful lives for development costs disclosed in the accounting policy footnote? costs by the amortization expense for fiscal 2016-2017. 3. The table below contains metrics as reported in JLR's three primary financial statements. Convert these metrics to a U.S. GAAP basis. Where necessary assume that JLR's tax rate is 21.1 percent, a rate disclosed in Footnote 14, Taxation. As Reported (IFRS) (£ millions) U.S. GAAP Profit before tax 1,610 Net profit (after tax) Total assets Shareholders' equity 1,272 10,962 6,581 3,160 3,056 Operating cash flow Capital expenditures Expenditures for both PPE and intangibles.  Get Accounting Homework Help Today.