问题详情

Klancet,apubliclimitedcompany,isapharmaceuticalcompanyandisseekingadviceonseveralfinancialreportingissues.
(a)Klancetproducesandsellsitsrangeofdrugsthroughthreeseparatedivisions.Inaddition,therearetwolaboratorieswhichcarryoutresearchanddevelopmentactivities.
Inthefirstoftheselaboratories,theresearchanddevelopmentactivityisfundedinternallyandcentrallyforeachofthethreesalesdivisions.Itdoesnotcarryoutresearchanddevelopmentactivitiesforotherentities.Eachofthethreedivisionsisgivenabudgetallocationwhichitusestopurchaseresearchanddevelopmentactivitiesfromthelaboratory.Thelaboratoryisdirectlyaccountabletothedivisionheadsforthisexpenditure.
Thesecondlaboratoryperformscontractinvestigationactivitiesforotherlaboratoriesandpharmaceuticalcompanies.Thislaboratoryearns75%ofitsrevenuesfromexternalcustomersandtheseexternalrevenuesrepresent18%oftheorganisation’stotalrevenues.
Theperformanceofthesecondlaboratory’sactivitiesandofthethreeseparatedivisionsisregularlyreviewedbythechiefoperatingdecisionmaker(CODM).Inadditiontotheheadsofdivisions,thereisaheadofthesecondlaboratory.TheheadofthesecondlaboratoryisdirectlyaccountabletotheCODMandtheydiscusstheoperatingactivities,allocationofresourcesandfinancialresultsofthelaboratory.
KlancetisuncertainastowhethertheresearchanddevelopmentlaboratoriesshouldbereportedastwoseparatesegmentsunderIFRS8OperatingSegments,andwouldlikeadviceonthisissue.(8marks)
(b)Klancethasagreedtosellapatentrighttoanotherpharmaceuticalgroup,Jancy.Jancywouldliketousethepatenttodevelopamorecomplexdrug.KlancetwillreceivepubliclylistedsharesoftheJancygroupinexchangefortheright.Thevalueofthelistedsharesrepresentsthefairvalueofthepatent.IfJancyissuccessfulindevelopingadrugandbringingittothemarket,Klancetwillalsoreceivea5%royaltyonallsales.
Additionally,Klancetwonacompetitivebiddingarrangementtoacquireapatent.ThepurchasepricewassettledbyKlancetissuingnewpubliclylistedsharesofitsown.
Klancet’smanagementwouldlikeadviceonhowtoaccountfortheabovetransactions.(7marks)
(c)KlancetiscollaboratingwithRettoLaboratories(Retto),athirdparty,todeveloptwoexistingdrugsownedbyKlancet.
Inthecaseofthefirstdrug,RettoissimplydevelopingthedrugforKlancetwithouttakinganyrisksduringthedevelopmentphaseandwillhavenofurtherinvolvementifregulatoryapprovalisgiven.Regulatoryapprovalhasbeenrefusedforthisdruginthepast.Klancetwillretainownershipofpatentrightsattachedtothedrug.Rettoisnotinvolvedinthemarketingandproductionofthedrug.Klancethasagreedtomaketwonon-refundablepaymentstoRettoof$4milliononthesigningoftheagreementand$6milliononsuccessfulcompletionofthedevelopment.
KlancetandRettohaveenteredintoasecondcollaborationagreementinwhichKlancetwillpayRettofordevelopingandmanufacturinganexistingdrug.Theexistingdrugalreadyhasregulatoryapproval.ThenewdrugbeingdevelopedbyRettoforKlancetwillnotdiffersubstantiallyfromtheexistingdrug.Klancetwillhaveexclusivemarketingrightstothedrugiftheregulatoryauthoritiesapproveit.Historically,inthisjurisdiction,newdrugsreceiveapprovaliftheydonotdiffersubstantiallyfromanexistingapproveddrug.
ThecontracttermsrequireKlancettopayanupfrontpaymentonsigningofthecontract,apaymentonsecuringfinalregulatoryapproval,andaunitpaymentof$10perunit,whichequalstheestimatedcostplusaprofitmargin,oncecommercialproductionbegins.Thecost-plusprofitmarginisconsistentwithKlancet’sotherrecentlynegotiatedsupplyarrangementsforsimilardrugs.
KlancetwouldliketoknowhowtodealwiththeabovecontractswithRetto.(8marks)
Required:
AdviseKlancetonhowtheabovetransactionsshouldbedealtwithinitsfinancialstatementswithreferencetorelevantInternationalFinancialReportingStandards.
Note:Themarkallocationisshownagainsteachofthethreeissuesabove.
Professionalmarkswillbeawardedinquestion3forclarityandqualityofpresentation.(2marks)
请帮忙给出正确答案和分析，谢谢！