Research and Development: Rules, Criteria and Amortization (IAS38)

Some scribbles that may be of interest to you on the subject of for .

:
for Intangible assets:

…. intangible assets need to be providing future probable benefits and need to be measurable. You also need to be able to identify the asset and it and there are some other interesting criteria… too many to mention here 🙂

Rules for capitalization under IAS38/IFRS:

  • Research : EXPENSE
  • Development: capitalized, but only after technical AND commercial feasibility of the asset for sale or use have been established

If an entity cannot distinguish the research phase of an 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, in other words: EXPENSE.

If the asset life is finite, you “simply” (its not that simple) depreciate the asset over the useful economic life and if the asset is infinite you impair annually (IAS36).

As sharp contrast the last thing I would like to mention is that under US GAAP, research and development expenses are expensed as incurred. Intangibles impairement for purchased R&D that has been capitalized should be impaired annually under US GAAP. It may be that if the purchased R&D that was capitalized has no future benefits, it would need to be written off.

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