The case draws on the experience of Denelle Smart, assistant comptroller for financial reporting for a New Hampshire subsidiary of a London-based company. She has been assigned a role in her company’s transition from UK GAAP to International Financial Reporting Standards (IFRS) taking place throughout the European Union. In addition to describing the many challenges Denelle faces as she leads her company’s transition to IFRS, this case discusses specific IAS 38 criteria, which determine how research and development costs must be accounted for under IFRS. The introductory financial accounting student is given a brief introduction to IFRS along with a review of US/UK GAAP treatment of research and development costs and capitalization of costs in general.



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