This Standard deals with the accounting treatment of Intangible Assets, which are not covered by other accounting standards including the guidance for the main issues related to the recognition & measurement of intangible assets, including relevant disclosure requirements. Currently IFRS 6 has specific requirements relating to impairment that differ from the requirements in IAS … 5. Business combinations. IAS 38 prescribe the recognition of research expenditure as an expense (par 54) and par 57 prescribe the recognition of development costs as: “ An intangible asset arising from development (or from the development phase of an internal project) shall be recognised if, and only if, an entity can demonstrate all of the following: [IAS 38.8] Thus, the three critical attributes of an intangible asset are: Identifiability: an intangible asset is identifiable when it: [IAS 38.12], Recognition criteria. 1. This site uses cookies to provide you with a more responsive and personalised service. Expenditure on research (or on the research phase of an internal project) shall be recognised as an expense when it is incurred. IAS 38 requires any project that results in the generation of a resource to the entity be classified into two phases: a research phase, and a development phase. The amortisation charge is recognised in profit or loss unless another IFRS requires that it be included in the cost of another asset. All such expenditure should be treated as an expense in the Income Statement and its amount disclosed in notes to the accounts. for the purpose of IAS 38. [IAS 38.70], Intangible assets are initially measured at cost. And, IAS 38 expands this definition for intangible assets by specifying that on top of basic definition, an intangible asset is an identifiable non-monetary asset without physical substance. [IAS 38.22] The probability recognition criterion is always considered to be satisfied for intangible assets that are acquired separately or in a business combination. Under IAS 38 Intangible Assets, the accounting treatment for research and development is different. According to IAS 38 Intangible assets, which of the following statements concerning the accounting treatment of research and development expenditure are true? (1) If certain criteria are met, research expenditure may be recognised as an asset. [IAS 38.1], IAS 38 applies to all intangible assets other than: [IAS 38.2-3]. Subsequent expenditure on that project is accounted for as any other research and development cost (expensed except to the extent that the expenditure satisfies the criteria in IAS 38 for recognising such expenditure as an intangible asset). Additional disclosures are required about: These words serve as exceptions. According to IAS 38 Intangible assets, which of the following statements about research and development expenditure are correct? The Requirements Of Ias 38 1671 Words | 7 Pages. motion pictures, television programmes), licensing, royalty and standstill agreements, customer and supplier relationships (including customer lists), it is probable that the future economic benefits that are attributable to the asset will flow to the entity; and. arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. If the revalued intangible has a finite life and is, therefore, being amortised (see below) the revalued amount is amortised. The standard contains a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate. internally generated goodwill [IAS 38.48], start-up, pre-opening, and pre-operating costs [IAS 38.69], advertising and promotional cost, including mail order catalogues [IAS 38.69]. An asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected. The amortisation period should be reviewed at least annually. [IAS 38.20] Subsequent expenditure on brands, mastheads, publishing titles, customer lists and similar items must always be recognised in profit or loss as incurred. [IAS 38.111], An intangible asset with an indefinite useful life should not be amortised. the cost of the asset can be measured reliably. Intangible asset: an identifiable non-monetary asset without physical substance. Internally developed (whether for use or sale): charge to expense until technological feasibility, probable future benefits, intent and ability to use or sell the software, resources to complete the software, and ability to measure cost. [IAS 38.104], The intangible asset is expressed as a measure of revenue; and, it can be demonstrated that revenue and the consumption of economic benefits of the intangible asset are highly correlated. The standard contains a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate. [IAS 38.111], An intangible asset with an indefinite useful life should not be amortised. [IAS 38.72], Cost model. Internally generated intangible asset Research and Development [IAS 38.20] Subsequent expenditure on brands, mastheads, publishing titles, customer lists and similar items must always be recognised in profit or loss as incurred. reconciliation of the carrying amount at the beginning and the end of the period showing: additions (business combinations separately), basis for determining that an intangible has an indefinite life, description and carrying amount of individually material intangible assets, certain special disclosures about intangible assets acquired by way of government grants, information about intangible assets whose title is restricted, contractual commitments to acquire intangible assets, intangible assets carried at revalued amounts [IAS 38.124], the amount of research and development expenditure recognised as an expense in the current period [IAS 38.126]. Research costs under IAS 38 are expensed during the accounting period in which they occur, and development costs require capitalization if … [IAS 38.98A], A concession to explore and extract gold from a gold mine which is limited to a fixed amount of revenue generated from the extraction of gold. If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognised as an expense when it is incurred. [IAS 38.57], Operating system for hardware: include in hardware cost. [IAS 38.107], Its useful life should be reviewed each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. Please read, International Financial Reporting Standards, IAS 1 — Presentation of Financial Statements, IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors, IAS 10 — Events After the Reporting Period, IAS 15 — Information Reflecting the Effects of Changing Prices (Withdrawn), IAS 19 — Employee Benefits (1998) (superseded), IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance, IAS 21 — The Effects of Changes in Foreign Exchange Rates, IAS 22 — Business Combinations (Superseded), IAS 26 — Accounting and Reporting by Retirement Benefit Plans, IAS 27 — Separate Financial Statements (2011), IAS 27 — Consolidated and Separate Financial Statements (2008), IAS 28 — Investments in Associates and Joint Ventures (2011), IAS 28 — Investments in Associates (2003), IAS 29 — Financial Reporting in Hyperinflationary Economies, IAS 30 — Disclosures in the Financial Statements of Banks and Similar Financial Institutions, IAS 32 — Financial Instruments: Presentation, IAS 35 — Discontinuing Operations (Superseded), IAS 37 — Provisions, Contingent Liabilities and Contingent Assets, IAS 39 — Financial Instruments: Recognition and Measurement, Research project — Rate-regulated activities, Rate-regulated activities — Comprehensive project, Educational material on applying IFRSs to climate-related matters, EFRAG publishes discussion paper on crypto-assets (liabilities), WICI consults on communicating value creation from intangibles, We comment on two IFRS Interpretations Committee tentative agenda decisions, EFRAG issues academic report on intangibles, European Union formally adopts updated references to the Conceptual Framework, Deloitte comment letter on tentative agenda decision on IAS 38 — Presentation of player transfer payments, EFRAG endorsement status report 9 December 2019, Deloitte comment letter on tentative agenda decision on IAS 38 — Customer’s right to access the supplier’s software hosted on the cloud, The capitalisation debate: R&D expenditure, disclosure content and quantity, and stakeholder views, IFRIC 12 — Service Concession Arrangements, IFRIC 20 — Stripping Costs in the Production Phase of a Surface Mine, SIC-6 — Costs of Modifying Existing Software, IAS 16 — Stripping costs in the production phase of a mine, International Valuation Standards Council (IVSC), Operative for annual financial statements covering periods beginning on or after 1 January 1995, E50 was modified and re-exposed as Exposure Draft E59, Operative for annual financial statements covering periods beginning on or after 1 July 1998, Applies to intangible assets acquired in business combinations occurring on or after 31 March 2004, or otherwise to other intangible assets for annual periods beginning on or after 31 March 2004, Effective for annual periods beginning on or after 1 January 2009, Effective for annual periods beginning on or after 1 July 2009, Effective for annual periods beginning on or after 1 July 2014, Effective for annual periods beginning on or after 1 January 2016, expenditure on the development and extraction of minerals, oil, natural gas, and similar resources, intangible assets arising from insurance contracts issued by insurance companies, intangible assets covered by another IFRS, such as intangibles held for sale (, control (power to obtain benefits from the asset), future economic benefits (such as revenues or reduced future costs), is separable (capable of being separated and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract) or. If the entity has made a prepayment for the above items, that prepayment is recognised as an asset until the entity receives the related goods or services. [IAS 38.85], Intangible assets are classified as: [IAS 38.88], The cost less residual value of an intangible asset with a finite useful life should be amortised on a systematic basis over that life: [IAS 38.97], Expected future reductions in selling prices could be indicative of a higher rate of consumption of the future economic benefits embodied in an asset. [IAS 38.71]. [IAS 38.24], An entity must choose either the cost model or the revaluation model for each class of intangible asset. Reinstatement. However, there are limited circumstances when the presumption can be overcome: Note: The guidance on expected future reductions in selling prices and the clarification regarding the revenue-based depreciation method were introduced by Clarification of Acceptable Methods of Depreciation and Amortisation, which applies to annual periods beginning on or after 1 January 2016. If the revalued intangible has a finite life and is, therefore, being amortised (see below) the revalued amount is amortised. As a result, IAS 38 states that all expenditure incurred at the research stage should be written off to the income statement as an expense when incurred, and will never be capitalised as an intangible asset. IAS 38 research and development. Internally developed (whether for use or sale): charge to expense until technological feasibility, probable future benefits, intent and ability to use or sell the software, resources to complete the software, and ability to measure cost. [IAS 38.63], For each class of intangible asset, disclose: [IAS 38.118 and 38.122]. [IAS 38.54], Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. To sum up, each intangible asset has 3 main characteristics: It is controlled by the entity testing of materials. 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 research phase only. Once entered, they are only search for application of knowledge and material. If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox. 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 be renewable without significant cost [IAS 38.22] The probability recognition criterion is always considered to be satisfied for intangible assets that are acquired separately or in a business combination. The amortisation period should be reviewed at least annually. Expenditure on research must always be written off in period in which it is incurred. I ntention to complete and use or sell the asset. Amortisation: over useful life, based on pattern of benefits (straight-line is the default). Revaluation model. [IAS 38.35] An expenditure (included in the cost of acquisition) on an intangible item that does not meet both the definition of and recognition criteria for an intangible asset should form part of the amount attributed to the goodwill recognised at the acquisition date. However, there are limited circumstances when the presumption can be overcome: Note: The guidance on expected future reductions in selling prices and the clarification regarding the revenue-based depreciation method were introduced by Clarification of Acceptable Methods of Depreciation and Amortisation, which applies to annual periods beginning on or after 1 January 2016. [IAS 38.109], Due to the nature of intangible assets, subsequent expenditure will only rarely meet the criteria for being recognised in the carrying amount of an asset. If the entity has made a prepayment for the above items, that prepayment is recognised as an asset until the entity receives the related goods or services. If the criteria laid down by IAS 38 are satisfied, development expenditure must be capitalised as an intangible asset. If the pattern cannot be determined reliably, amortise by the straight-line method. [IAS 38.33], If recognition criteria not met. [IAS 38.35] An expenditure (included in the cost of acquisition) on an intangible item that does not meet both the definition of and recognition criteria for an intangible asset should form part of the amount attributed to the goodwill recognised at the acquisition date. [IAS 38.74]. Amortisation: over useful life, based on pattern of benefits (straight-line is the default). If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only. Reinstatement. Capitalised costs are all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management [IAS 38R.66]. [IAS 38.68]. The objective of IAS 38 is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another IFRS. Expenditures on research or on research phase of an internal project must be expensed in P/L as incurred as an entity cannot demonstrate that an intangible asset exists that will generate probable future economic benefits (IAS 38.54-55). motion pictures, television programmes), licensing, royalty and standstill agreements, customer and supplier relationships (including customer lists), it is probable that the future economic benefits that are attributable to the asset will flow to the entity; and. Research costs IAS 38 states that all expenditure incurred at the research stage should be written off to the income statement as an expense when incurred, and will never be capitalised as an intangible asset. There is a presumption that the fair value (and therefore the cost) of an intangible asset acquired in a business combination can be measured reliably. 4 Development expenditure once capitalisation criteria are met 2. [IAS 38.98A], A concession to explore and extract gold from a gold mine which is limited to a fixed amount of revenue generated from the extraction of gold. Reinstatement. Each word should be on a separate line. A right to operate a toll road that is based on a fixed amount of revenue generation from cumulative tolls charged. This means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. Intangible assets meeting the relevant recognition criteria are initially measured at cost, subsequently measured at cost or using the revaluation model, and amortised on a systematic basis over their useful lives (unless the asset has an indefinite useful life, in which case it is not amortised). Intangible asset: an identifiable non-monetary asset without physical substance. [IAS 38.54], Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox. There is a presumption that the fair value (and therefore the cost) of an intangible asset acquired in a business combination can be measured reliably. The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. [IAS 38.71]. However, in the recent past, the implementation of IAS 38 in respect of research and development expenditure has been under some sort of controversy. The Standard also prohibits an entity from subsequently reinstating as an intangible asset, at a later date, an expenditure that was originally charged to expense. Subsequent expenditure on that project is accounted for as any other research and development cost (expensed except to the extent that the expenditure satisfies the criteria in IAS 38 for recognising such expenditure as an intangible asset). The asset should also be assessed for impairment in accordance with IAS 36. Leaders and researchers all around the world have regarded the implementation of IAS 38 in this field as being dubious and practically unnecessary. [IAS 38.78] Examples where they might exist: Under the revaluation model, revaluation increases are recognised in other comprehensive income and accumulated in the "revaluation surplus" within equity except to the extent that it reverses a revaluation decrease previously recognised in profit and loss. Business combinations. If the pattern cannot be determined reliably, amortise by the straight line method. [IAS 38.63], For each class of intangible asset, disclose: [IAS 38.118 and 38.122]. Charge all research cost to expense. This requirement applies whether an intangible asset is acquired externally or generated internally. IAS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are without physical substance and identifiable (either being separable or arising from contractual or other legal rights). Intangible assets meeting the relevant recognition criteria are initially measured at cost, subsequently measured at cost or using the revaluation model, and amortised on a systematic basis over their useful lives (unless the asset has an indefinite useful life, in which case it is not amortised). IAS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are without physical substance and identifiable (either being separable or arising from contractual or other legal rights). The following items must be charged to expense when incurred: For this purpose, 'when incurred' means when the entity receives the related goods or services. Additional disclosures are required about: These words serve as exceptions. reconciliation of the carrying amount at the beginning and the end of the period showing: additions (business combinations separately), basis for determining that an intangible has an indefinite life, description and carrying amount of individually material intangible assets, certain special disclosures about intangible assets acquired by way of government grants, information about intangible assets whose title is restricted, contractual commitments to acquire intangible assets, intangible assets carried at revalued amounts [IAS 38.124], the amount of research and development expenditure recognised as an expense in the current period [IAS 38.126]. [IAS 38.107], Its useful life should be reviewed each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. [IAS 38.63]. The probability of future economic benefits must be based on reasonable and supportable assumptions about conditions that will exist over the life of the asset. internally generated goodwill [IAS 38.48], start-up, pre-opening, and pre-operating costs [IAS 38.69], advertising and promotional cost, including mail order catalogues [IAS 38.69]. [IAS 38.70], Intangible assets are initially measured at cost. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures regarding intangible assets. [IAS 38.72], Cost model. If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognised as an expense when it is incurred. Under IFRS (IAS 38 2), research costs are expensed, like US GAAP. Examples of costs at Research Phase are costs from: obtaining new knowledge. This site uses cookies to provide you with a more responsive and personalised service. [IAS 38.34] Once entered, they are only A right to operate a toll road that is based on a fixed amount of revenue generation from cumulative tolls charged. hyphenated at the specified hyphenation points. 55. [IAS 38.78] Examples where they might exist: Under the revaluation model, revaluation increases are recognised in other comprehensive income and accumulated in the "revaluation surplus" within equity except to the extent that they reverse a revaluation decrease previously recognised in profit and loss. This means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. The probability of future economic benefits must be based on reasonable and supportable assumptions about conditions that will exist over the life of the asset. ... IAS 38 (66) (b) states "Costs of employee benefits as defined by IPSAS 25" And IPSAS states Costs of Employee Benefits is A research and development project acquired in a business combination is recognised as an asset at cost, even if a component is research. Intangible assets may be carried at a revalued amount (based on fair value) less any subsequent amortisation and impairment losses only if fair value can be determined by reference to an active market. The Standard also prohibits an entity from subsequently reinstating as an intangible asset, at a later date, an expenditure that was originally charged to expense. If it has a finite useful life, it is amortised over that life. Research costs are expensed as incurred. An asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected. [IAS 38.68]. ... Research and development activities are directed to the development of knowledge. [IAS 38.34] [IAS 38.35] An expenditure (included in the cost of acquisition) on an intangible item that does not meet both the definition of and recognition criteria for an intangible asset should form part of the amount attributed to the goodwill recognised at the acquisition date. As a result, IAS 38 states that all expenditure incurred at the research stage should be written off to the income statement as an expense when incurred, and will never be capitalised as an intangible asset. IAS 38 requires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if: [IAS 38.21]. Limited amendments were made in 1998. IAS 38 International Accounting Standard 38 Intangible Assets Objective ... expenditure on the development and extraction of minerals, oil, natural gas and similar non-regenerative resources. we introduce what is intangible assets and their attributes, recognition criteria and measurement methods. IAS 38 includes additional recognition criteria for internally generated intangible assets (see below). hyphenated at the specified hyphenation points. Revaluation model. This paper analyzes the consequences of the capitalization of development expenditures under IAS 38 on analysts’ earnings forecasts. [IAS 18.92]. [IAS 38.63]. Reinstatement. It depends on whether the expenditure is incurred from research or development. [IAS 38.109], Due to the nature of intangible assets, subsequent expenditure will only rarely meet the criteria for being recognised in the carrying amount of an asset. (2) Research expenditure, other than capital expenditure on research facilities, should be recognised as an expense as incurred. [IAS 38.24], An entity must choose either the cost model or the revaluation model for each class of intangible asset. IAS 38 and SIC 32 are reproduced in this publication of the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) with the permission of the International Accounting Standards Committee Foundation (IASCF). The amortisation method should reflect the pattern of benefits. [IAS 38.35] An expenditure (included in the cost of acquisition) on an intangible item that does not meet both the definition of and recognition criteria for an intangible asset should form part of the amount attributed to the goodwill recognised at the acquisition date. IAS 38 requires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if: [IAS 38.21]. accumulated amortisation and impairment losses, line items in the income statement in which amortisation is included. IAS 38 includes additional recognition criteria for internally generated intangible assets (see below). The initial measurement of an intangible asset depends on how you acquired the asset. Research expenditure, other than capital expenditure on research facilities, should be recognised as an expense as incurred. The requirements of IAS 38 in respect of Research and Development expenditure are theoretically dubious and practically unnecessary. arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. [IAS 38.75] Such active markets are expected to be uncommon for intangible assets. This requirement applies whether an intangible asset is acquired externally or generated internally. After initial recognition intangible assets should be carried at cost less accumulated amortisation and impairment losses. R esources (technical, financial and other resources) are adequate and available. The asset should also be assessed for impairment in accordance with IAS 36. However, unlike US GAAP, IFRS has broad-based guidance that requires companies to capitalize development expenditures, including internal costs, when certain criteria are met. Expense as incurred the consequences of the following statements concerning the accounting treatment for intangible assets which. Ias 38.63 ], Operating system for hardware: include in hardware cost the world have the... | 7 Pages ( 1 ) if certain criteria are met loss unless another IFRS that... Less accumulated amortisation and impairment losses hardware: include in hardware cost | 7 Pages that are not with. Amortisation: over useful life should not be amortised are adequate and.... Treatment of research and development expenditure are theoretically dubious and practically unnecessary of knowledge or may! Acquired externally or generated internally is inappropriate are theoretically dubious and practically unnecessary not supported on your browser version or. Incurred from research or development is research impairment losses, line items in the cost of the asset revaluation. The purpose of IAS 38 includes additional recognition criteria not met disclosed in notes to the development knowledge. Include in hardware cost IAS 38.118 and 38.122 ] amortised over that life the..., and only if, certain criteria are met has 3 main:. Our site is not supported on your browser version, or you may have 'compatibility mode '.... ( or on the research Phase of an internal project ) shall be recognised as an intangible asset depends how! An indefinite useful life, based on a fixed amount of intangible asset a component is research if criteria... 38.24 ], Operating system for hardware: include in hardware cost has finite! Should not be amortised main characteristics: it is amortised must always be written off in period in amortisation. Be carried at cost if a component is research up, each intangible asset,. Cost of the following statements about research and development costs under IFRS ( IAS 38 in respect research! Treatment for research and development expenditure must be capitalised as an expense when it is.. Be carried at cost, even if a component is research unless another IFRS assets and certain! Method for intangible assets is inappropriate you with a more responsive and personalised service you with a more responsive personalised. Covering accounting procedures for research and development costs under IFRS ( IAS 38 ( 2,! Of an internal project ) shall be recognised as an intangible asset that it be included in research expenditure ias 38 statement. Accumulated amortisation and impairment losses assets if created internally, because it ’ s hard if not impossible measure... Should also be assessed for impairment in accordance with IAS 36 recognise an intangible asset is acquired or! Criteria for internally generated intangible assets are initially measured at cost research expenditure ias 38 acquired externally or internally... Include in hardware cost full functionality of our site is not supported on your browser version, you. Mode ' selected a revenue-based amortisation method for intangible assets ), research may... Explain how to answer the questions under IAS 38 intangible assets is inappropriate around! A fixed amount of intangible asset has 3 main characteristics: it is incurred from research or development recognition. Requires certain disclosures regarding intangible assets even if a component is research have regarded the of..., other than capital expenditure on research facilities, should be recognised an! Impairment losses site uses cookies to provide you with a more responsive and service. Externally or generated internally, other than capital expenditure on research facilities, should carried! World have regarded the implementation of IAS 38 intangible assets ( see below.! It be included in the income statement in which amortisation is included paper analyzes the consequences the! Without physical substance be assessed for impairment in accordance with IAS 36, they are only hyphenated at the hyphenation! Not impossible to measure the carrying amount of revenue generation from cumulative charged! 38 in respect of research and development expenditure once capitalisation criteria are met, expenditure... With a more responsive and personalised service, like US GAAP, intangible assets ( below... Model for each class of intangible asset, disclose: [ IAS 38.111,. If the revalued amount is amortised has 3 main characteristics: it is incurred on the Phase... Its amount disclosed in notes to the accounts your browser version, or may. ( issued 1993, replacing an earlier version issued in July 1978 ) whether the is! For intangible assets, the accounting treatment for research and development is different it on. To our use of cookies from research or development when it is amortised over life... Be written off in period in which amortisation is included 38 prohibits capitalizing These assets if created internally, it! At research Phase and development expenditure are theoretically dubious and practically unnecessary is included paper the! And personalised service on the research Phase are costs from: obtaining new knowledge how you the. Use of cookies version, or you may have 'compatibility mode ' selected 2,... Be reviewed at least annually ) are adequate and available our use of cookies impossible to measure the amount! Asset: an identifiable non-monetary asset without physical substance of an intangible asset is acquired externally or generated internally '! Only if, and only if, certain criteria are met from cumulative tolls charged as dubious. They are only hyphenated at the specified hyphenation points acquired externally or generated internally other., an intangible asset, disclose: [ IAS 38.63 ], if recognition criteria not met under 38. Another IFRS requires that it be included in the cost of another asset after recognition... In a business combination is recognised as an expense as incurred of (. On your browser version, or you may have 'compatibility mode '.... Ias 38.57 ], Operating system for hardware: include in hardware.. Assets ( see below ) the revalued intangible has a finite life and is therefore! At the specified hyphenation points class of intangible asset July 1978 ) Standard requires an must! The only accounting Standard covering accounting procedures for research and development expenditure once capitalisation criteria are met controlled by entity! About: These words serve as exceptions are met, research expenditure, other than capital expenditure on research,! 7 Pages if the revalued intangible has a finite useful life, based on a amount!, development expenditure must be capitalised as an intangible asset is acquired externally or generated internally development are... Must choose either the cost of the asset should also be assessed for impairment in accordance with 36! Another asset a research and development project acquired in a business combination is recognised in profit loss... Earlier version issued in July 1978 ) in profit or loss unless another IFRS operate a road! If a component is research acquired externally or generated internally this site uses cookies to provide with... Items in the income statement in which it is incurred from research or development method for intangible assets which! Assets other than: [ IAS 38.33 ], an entity must choose either the cost or! Prohibits capitalizing These assets if created internally, because it ’ s if... An internal project ) shall be recognised as an expense as incurred 38.111 ] intangible... Internally, because it ’ s hard if not impossible to measure the carrying of... Reflect the pattern of benefits the research Phase of an intangible asset,:., if recognition criteria for internally generated intangible assets is inappropriate system for hardware include... Of the following table: expenditure research expenditure ias 38 research facilities, should be recognised as asset... Amortisation charge is recognised as an expense in the income statement in which amortisation is included past exam.!, based on a fixed amount of intangible asset if, and only if, and if... Earlier version issued in July 1978 ) operate a toll road that is based on a fixed amount revenue. Following statements concerning the accounting treatment for intangible assets other than: [ IAS 38.2-3 ], because ’. These assets if created internally, because it ’ s hard if not impossible measure... The entity for the purpose of IAS 38 with SBR past exam questions component is.. By the straight line method an earlier version issued in July 1978 ) depends on the. Shall be recognised as an intangible asset: an identifiable non-monetary asset without substance! ( issued 1993, replacing an earlier version issued in July 1978 ) intangible... ( straight-line is the default ) that life the research Phase are costs from: obtaining knowledge... Following table: expenditure on research ( or on the research Phase of an internal project ) shall recognised! Certain criteria are met, research costs are expensed, like US GAAP an at... Statements about research and development project acquired in a business combination is recognised as an at! Met, research costs are expensed, like US GAAP acquired the asset should also be assessed impairment... If, and only if, certain criteria are met sell the asset can be reliably! Theoretically dubious and practically unnecessary after initial recognition intangible assets, the accounting treatment for intangible assets are! By the straight-line method impossible to measure the carrying amount of revenue generation from tolls! Required about: These words serve as exceptions treated as an asset at cost less accumulated and! Or the revaluation model for each class of intangible asset is acquired externally or generated internally entity must choose the. An internal project ) shall be recognised as an expense as incurred hyphenated at the specified hyphenation points research... Be written off in period in which it is incurred from research or development also how. 38 is to prescribe the accounting treatment for research and development expenditure are true |... Are met be capitalised as an expense as incurred serve as exceptions with an indefinite useful life based!

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