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Problem
XYZ Limited has recently obtained some patents considered useful in its manufacture of men's shoes. The patents consist of:
Patent XC456, acquired from a leather manufacturing firm for $425000.
Patent CU254, obtained as part of a bundle of assets acquired from the conglomerate U- Beauty Fashions.
XYZ Ltd is also in the process of preparing an application for a patent for a new process of softening leather. It has spent a number of years refining this process. The accountant for XYZ Ltd is unsure how to account for patents under IFRSs. He has asked you to prepare a detailed report for him on the principles of how to account for patent, using the examples above to illustrate the appropriate accountant procedures.
Required: Prepare a report for XYZ Ltd.'s accountant.
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