| According to IAS 38 – Intangible assets – how should research be treated in the financial statements? | Research costs should be expensed in the Income Statement. |
| What is Goodwill? | The excess of the value of a business over the fair value of the net assets. |
| What is the key accounting standard relating to research and development? | IAS 38 |
| What are intangible non-current assets? | "An identifiable, non-monetary asset without physical substance" |
| What are the two examples of intangible non-current assets that are examinable in F3? | Goodwill and R&D |
| What is development? | The application of research and knowledge to the production of new or greatly improved products or services. |
| What does IAS 38 separate R&D into? | The research phase and the development phase. |
| Under IAS 38 what is the criteria for intangible assets? | They must:
- Be able to measure the expenses in a reliable way
- Be an identifiable product
- Have the resources to complete development
- Have an identifiable market |
| In which financial statement should research be recorded? | In the Statement of Profit or Loss as an expense when incurred. |
| In which financial statement should development be recorded? | In the Statement of Financial Position capitalised as Intangible non-current assets. |
| What is amortisation? | When "the cost of the development expenditure is matched against the revenue it produces."
This is only begun when the asset is available for use. |
| In which financial statement should amortisation expenses be recorded. | In the Statement of Profit or Loss as an expense. |
| In which financial statement should accumulated amortisation be recorded? | In the Statement of Financial Position as a deduction to development. |
| When should an intangible asset *NOT* be amortised? | When the asset is considered to have an indefinite useful life. |
| According to IAS 38 – Intangible assets – how should research be treated in the financial statements? | Research costs should be expensed in the Income Statement. |
| How is a contingent asset treated in the Financial Statements if the likelihood of the asset being confirmed is regarded as probable? | If it is probable, then the asset should not be recognised in the Financial Statements, but it should be disclosed by way of note. |
| What does IAS 38 paragraph 8 state with regards to the definition of Research? | "Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding." |
| What does IAS 38 paragraph 8 state with regards to the definition of Development? | "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 of use." |
| What are the two ways of measuring intangible assets? | The Cost method and the Revaluation method. |
| Under the Cost method of measuring intangible assets, where are the charges accounted for? | In the SPL only. |
| Under the Revaluation method of measuring intangible assets, where are the movements in the CA accounted for? | In other comprehensive income and other components of equity. |
| What are development costs? | Internally generated intangible assets which are capitalised, provided that specific criteria have been complied with. |
| What is the acronym for the criteria for development costs? | PIRATE |
| What are the criteria for development costs? | Probable inflow of economic benefits; Intention to complete the asset and use/sell it; Reliable measurement of development; Adequate financial resources; Technical feasibility to complete the asset; Expected to be profitable. |
| If the criteria for development expenditure are not met, what should be done? | It must be written off to the Statement of profit or loss. |
| How should equipment for research be treated? | It is capital expenditure and should be capitalised and depreciated. |
