Charge all research cost to expense. Standard also prescribes rules for measurement after recognition and permits 2 models: Cost model; and Thus, at least technically, the capitalisation of development costs is not considered a managerial choice. a) research phase; and b) a development phase. IAS 38 International Accounting Standard 38 Intangible Assets ... 5 This Standard applies to, among other things, expenditure on advertising, training, start-up, research and development activities. research and development costs (hereafter R&D). Recognize the disclosures required by IAS 38. However, unlike US GAAP, IFRS has broad-based guidance that requires companies to capitalize development expenditures, including internal costs, when certain criteria are met. If an entity cannot distinguish the research phase from the development phase of an internal project to create an intangible asset treats the expenditure on that project as if it were incurred in the According to IAS 38 Intangible assets, which of the following statements concerning the accounting treatment of research and development expenditure are true? IAS 38 Intangible Assets 2017 - 05 3 Subsequent expenditure on an acquired in-process research and development project Research or development expenditure that: (a) relates to an in-process research or development project acquired separately or in a business combination and recognised as an intangible asset; and (2) Research expenditure, other than capital expenditure on research facilities, should be recognised as an expense as incurred. • ‘research phase’ and ‘development phase’ have a broader meaning for the purpose of IAS 38. See IAS 36 for impairment testing. Distinguish between research and development costs and apply the six criteria for capitalization of development expenditures. IAS 38, para 126, research and development expenditure in the year and further analysis IAS 38 para 126, analysis of R&D costs charged to income, segmental analysis, accounting policy IAS 38 paras 94-96, intangibles assigned useful life longer than contractual period as expected to … 5. Research and development activities are directed to the development of knowledge. USEFUL LIFE Recognition criteria always considered met. Examples include: patents, licenses, & … Cost = FV @acquisition date. Under IFRS (IAS 38 2), research costs are expensed, like US GAAP. Recall the rules for subsequent measurement of an intangible asset. (1) If certain criteria are met, research expenditure may be recognised as an asset. Research and Development, Uncertainty, and Analysts’ Forecasts: The Case of IAS 38 October 2015 Journal of International Financial Management & Accounting 26(3) In relation to internally generated intangibles, IAS 38 gives further guidance on classification of generation of the asset into research phase and development phase and sets rules on determination of cost of an internally generated asset. Under IAS 38 Intangible Assets, while research costs are expensed, development costs should be capitalised, if they meet the six conditions specified in the standard. [IAS 38.54] Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. IFRIC 32 applies IAS 38 to website costs. IAS 38 covers the definition and recognition criteria for Intangible Assets. 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