The main contents of the chapter consist of the following: IAS 38, IAS 38 (Disclosure), impairment of assets – IAS 36, measurement of recoverable amount, indication of impairment, annual impairment reviews. | Revise lecture 13 1 IAS 38 Definitions: Research can be defined as original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding 2 IAS 38 Definitions: Development can be defined as 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. 3 IAS 38 Accounting treatment of research All research expenditure should be written off to the income statement as it is incurred. This is compliance with the prudence concept. Research expenditure does not directly lead to future benefits and therefore it is not possible to follow the matching concept. Any capital expenditure on research equipment should be capitalised and depreciated as normal. 4 IAS 38 Accounting treatment of development Development expenditure must be capitalised as an intangible asset provided that certain criteria are met: Separate project Expenditure identifiable and reliably measured Commercially viable Technically feasible Overall profitable Resources available to complete 5 IAS 38 (Disclosure) The financial statements should disclose the following for capitalised development costs: The amortisation method used and the expected period of amortisation A reconciliation of the carrying amounts at the beginning and end of the period, showing new expenditure incurred, amortisation and amounts written off because a project no longer qualifies for capitalisation Amortisation during the year 6 Impairment of assets – IAS 36 7 Objective of IAS 36 Definition of impairment Measurement of recoverable amount Indication of impairment Annual impairment reviews 8 Impairment of assets – IAS 36 Objective of IAS 36 impairment of assets The objective is to set rules to ensure that the assets of an entity are carried at no more than their recoverable amount . value to the . | Revise lecture 13 1 IAS 38 Definitions: Research can be defined as original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding 2 IAS 38 Definitions: Development can be defined as 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. 3 IAS 38 Accounting treatment of research All research expenditure should be written off to the income statement as it is incurred. This is compliance with the prudence concept. Research expenditure does not directly lead to future benefits and therefore it is not possible to follow the matching concept. Any capital expenditure on research equipment should be capitalised and depreciated as normal. 4 IAS 38 Accounting treatment of development Development expenditure must be capitalised as an intangible .
