Assoria co – R&D

Hi.

I’m having trouble understanding part of the answer in the BPP revision kit (question #34). The question reads:
Assoria Co had $20m of capitalized dev. expenditure at cost brought forward at 1 Oct 20X7 in respect of products currently in production and a new project began on the same date.

The research stage of the new project lasted until 31 dec 20X7 and incurred $1.4M of costs. From that date the project incurred development costs of $800k/month. On 1 April 20X8 the directors of Assoria Co became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development at 30 Sept 20X8. Capitalized development expenditure is amortized at 20% p.a. using a straight line method.

What amount will be charged to P&L for the year ended 30 Sept 20X8 in respect of R&D?

The answer provided lists:

1) Research Costs – 1,400,000
2) Depreciation on capitalized amount: 4,000,000
3) Expensed Development (800×3): 2,400,000

I understand 1 and 2, but why 3? Why would what are described as “development costs” hit the P&L at all and not get capitalized for 9 months since it’s stated that the project was still in development as of the reporting date? What impact does the decison of the directors have here in method of recognizing he costs? I also understand that the costs would not get amortized since the product was not ready for use. My answer would have been $5.4M

Thanks in advance.

Rachel