In the footnotes to the IFRS-based 2008 financial statements of European Aeronautical Defense and Space Company (EADS), parent company for Airbus, research and development (R&D) expenses were reported at 2,699 million euros. Also included in the footnotes is a chart describing the activity during 2008 in an intangible asset account called “capitalized development costs,” which shows the following (in million euros):
a. Explain the nature of the account called “capitalized development costs,” and how EADS is accounting for R&D.
b. How would this account be treated if EADS followed U.S. GAAP?
c. Estimate the amount of R&D expense EADS would have recognized during 2008 if it had followed U.S. GAAP.
d Estimate the overall effect on 2008 net income of using IFRS vs. U.S. GAAP to account for R&D costs
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