Yakub02
Banned
Other internally generated intangibles Assessment of whether an internally generated intangible asset meets the criteria for recognition requires a company to classify the generation of the asset into:
a research phase; and
a development phase.
Definitions: Research Research:
Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development:
The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use.
Accounting treatment of development costs
Development costs must be recognised as an intangible asset, but only if all the following conditions can be demonstrated.
It is technically feasible to complete the development project.
The company intends to complete the development of the asset and then use or sell it.
The asset that is being developed is capable of being used or sold. Future economic benefits can be generated. This might be proved by the existence of a market for the asset’s output or the usefulness of the asset within the company itself. Resources are available to complete the development project.
The development expenditure can be measured reliably (for example, via costing records). Only expenditure incurred after all the conditions have been met can be capitalised. Once such expenditure has been written off as an expense, it cannot subsequently be reinstated as an intangible asset.
a research phase; and
a development phase.
Definitions: Research Research:
Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development:
The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use.
Accounting treatment of development costs
Development costs must be recognised as an intangible asset, but only if all the following conditions can be demonstrated.
It is technically feasible to complete the development project.
The company intends to complete the development of the asset and then use or sell it.
The asset that is being developed is capable of being used or sold. Future economic benefits can be generated. This might be proved by the existence of a market for the asset’s output or the usefulness of the asset within the company itself. Resources are available to complete the development project.
The development expenditure can be measured reliably (for example, via costing records). Only expenditure incurred after all the conditions have been met can be capitalised. Once such expenditure has been written off as an expense, it cannot subsequently be reinstated as an intangible asset.