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Hi sir,
I am confused about the two sentence.
1 “The development of a new process which is not expected to increase sales revenues may still be recognised as an intangible asset.”, which is true.
2 ” Expenditure on the prototype of a new engine cannot be classified as an intangible asset because the prototype has been assembled and has physical substance.” which is not true.Just because a new process doesn’t produce additional revenue does not necessarily mean that we can’t recognise it as an intangible asset. There may be all sorts of other benefits without an increase in sales. For example, a new process could well speed up the production of out stock items and make them less expensive to produce. So even with no increase in revenue, the process will bring benefits to the company
Imagine a company involved in research and development. They’ve passed the research stage, they’re into development. A prototype is produced. And now we’re working on the prototype to try to improve its performance, its shape, its colour, its capacity, its ability, its range of activities
Yes, it has physical form, but it’s still in development stage and therefore classified as an intangible asset
OK?
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