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Research costs follow accrual concept but do not follow matching concept.
Accrual concept in a way that we expense off research costs in the year incurred. However, lacks matching concept, as we charge in PNL and after some time after doing development and making the product we sell the product. Therefore, expenditure of research does not match sales.
Am I right, tutor?You are right, but the reason for it is that research does not always end up with a new product and therefore there might never be any income to match the expense against. Whereas with development costs (subject to the conditions) there will be income and therefore there is something to match the cost against.
Right tutor. And tutor, one more query, if our research is successful so will we capitalise those research cost or no? I watched your lectures you said that research costs are expense for us that is why just confirming that in every condition we will make it revenue expenditure?
No, we will not capitalise.
Once it has been charged as revenue expenditure in the SOPL, then that is the end of it 🙂
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