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Kim Smith.
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- August 31, 2025 at 8:29 pm #719700
Hello!
Thank you for answering my questions in advance! One day before AAA so trying to clear up little things that I have not paid attention to before.
I was looking at joint arrangements where two investors have shared control over an investment.
Let’s say in a case where one investor contributed monetary capital (e.g. assets, equipment, vehicles) for the operation, and the other investor promised to contribute expertise (e.g. researchers, labour skills) to do a research project. This means that the joint venture does not need to incur any expenditure for staff costs in relation to researching/development.
Under equity accounting, the investment should be recognised at cost, which is relatively straightforward for the monetary capital. However, for the investor who contributed expertise and staff–the costs are not yet incurred and there is uncertainty of how long a research project will take, hence it could be hard to estimate what the actual time that researchers are going to end up spending. If the researcher had made use of one of the patented knowledge (intangible asset?) during the project period, that can be hard to quantify either.
As auditors, how do we confirm if the investment has been recognised correctly?
I have thought of using the researcher’s payroll to estimate the total costs for the duration of the project, but there are alot of uncertainties and I don’t know how can we check for any risk of misstatements, or if both sides have the same amount of control when one party is contributing non-monetary items.Please can you share some insights?
September 1, 2025 at 3:15 pm #719741My apologies, but I didn’t see this until this morning, by which time I supposed any response would be too late.
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