Standard also prescribes rules for measurement after recognition and permits 2 models: Cost model; and (2) Research expenditure, other than capital expenditure on research facilities, should be recognised as an expense as incurred. According to IAS 38 Intangible assets, which of the following statements concerning the accounting treatment of research and development expenditure are true? Research and Development, Uncertainty, and Analysts’ Forecasts: The Case of IAS 38 October 2015 Journal of International Financial Management & Accounting 26(3) 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. Charge all research cost to expense. IAS 38 covers the definition and recognition criteria for Intangible Assets. Determine the appropriate measurement of an intangible asset. Research and development activities are directed to the development of knowledge. IAS 38 has illustrative examples. (1) If certain criteria are met, research expenditure may be recognised as an asset. See IAS 36 for impairment testing. 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 Acquiree’s in-process research & development project: • ‘research phase’ and ‘development phase’ have a broader meaning for the purpose of IAS 38. Cost = FV @acquisition date. Examples include: patents, licenses, & … USEFUL LIFE Recognition criteria always considered met. Nevertheless, from Under IFRS (IAS 38 2), research costs are expensed, like US GAAP. 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 This means that the enterprise 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. However, unlike US GAAP, IFRS has broad-based guidance that requires companies to capitalize development expenditures, including internal costs, when certain criteria are met. 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. 5. Recall the rules for subsequent measurement of an intangible asset. Recognize the disclosures required by IAS 38. research and development costs (hereafter R&D). 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 … 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. Under IAS 38, Intangible Assets are property that does not have a physical form but meets the three definition criteria: identifiable, controllable property that provides future economic benefits. Thus, at least technically, the capitalisation of development costs is not considered a managerial choice. a) research phase; and b) a development phase. See IAS 38 for retirements and disposals (similar to IAS 16 derecognition for PPE). IFRIC 32 applies IAS 38 to website costs. 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