International Financial Reporting Standards_guide.pdf

144 Chapter 13 Intangible Assets (IAS 38)
13.3.2 Development is 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.
13.3.3 Research is original and planned investigation undertaken with prospect of gaining
new scientific or technical knowledge and understanding.
13.4 ACCOUNTING TREATMENT
Recognition
13.4.1 An intangible asset is recognized as an asset (in terms of the framework) if
■ it meets the definition of an intangible asset;
■ it is probable that the future economic benefits attributable to the asset will flow to the
entity; and
■ the cost of the asset can be measured reliably.
13.4.2 Internally generated goodwill may not be recognized. Other internally generated
intangible assets that may not be recognized include brands, mastheads, customer lists, and
similar items that are not acquired through a business combination.
13.4.3 Development expenditure is recognized as an intangible asset if all of the following
can be demonstrated:
■ the technical feasibility of completing the intangible asset so that it will be available for
use or sale (the “eureka” moment where one can state with certainty that a product will
result from the efforts);
■ the availability of adequate technical, financial, and other resources to complete the
development of the intangible asset and to use or sell it;
■ the intention to complete the intangible asset and use or sell it;
■ the ability to use or sell the intangible asset;
■ the demonstration of how the intangible asset will generate probable future economic
benefits; and
■ the ability to measure the expenditure.
13.4.4 Development expenditure previously recognized as an expense cannot be subsequently
capitalized as an asset.
13.4.5 Research expenditure is recognized as an expense when incurred.
13.4.6 Expenses related to the following categories are not recognized as intangible assets
and are expensed:
■ internally generated brands (externally purchased brand names might qualify for capitalization
if independently valued)
■ mastheads, publishing titles, customer lists, and so on;
■ start-up costs;
■ training costs;
■ advertising and promotion;
■ relocation and reorganization expenses;
■ redundancy and other termination costs; and
■ expenses after the asset is capable of operating for its intended purpose.