Intangible Assets: Goodwill, Research and Development - ACCA Financial Accounting (FA) lectures
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10 Comments
A
Andre·
prof. Moffat ChatGPT says that under both IFRS and US GAAP goodwill is assessed for impairment on a regular basis instead of being amortized. Is that a mistake?
J
John MoffatTutor·
It is not a mistake, but is only relevant when you come to Paper FR. For Paper FA it is only as is stated in the lecture :-)
P
Pedro·
Wouldn't companies just say all the expenditure was for research rather than development as this will reduce their tax liability? (from the reduced profit)
What's the benefit in capitalising it? (Seeming as the criteria may be debatable to prove)
H
Haroon·
Someone correct me if im wrong, but I'm sure they would still get the tax relief from capitalising due to claiming AIA on their tax return (this would probably be covered in the tax area, but doesn't seem to be required for the FA paper).
J
John MoffatTutor·
Tax is not examinable in Paper FA (with the exception of the entries for sales tax).
There is still a tax saving if it is capitalised because the profit each year will be reduced due to the amortisation/depreciation. However it is not done to get a 'benefit' it is done because the accounting standards require it as showing a better representation.
C
Cody·
Amortisation forms part of this topic. Can't find any notes on it. !!
J
John MoffatTutor·
As is written in the notes and as I state in the lecture, all the costs of development are capitalised and shown as assets in the SOFP.
Costs of research are not capitalised and are charged as an expense in the SOPL (except in so far as any non-current assets purchased are capitalised in the normal way as explained in the earlier lectures on non-current assets).
Salaries of the workers for part of the total cost of development (if they are working on development) and the total cost of development is capitalised.
The total cost is amortised/depreciated in the normal way.
S
shakir7385·
Hi John. As you mentioned that the salaries of scientist who are doing research shall always be expense out. However, if the same scientist are in development phase and meeting all the defined criteria for development then the salary of scientist (for development period only) will also be capitalized? Similarly if the office space is taken on rent for research n development. For research related time period, rent would definitely be expense out however for the development phase, when development is certain, the rent for that period will be capitalized?
What's the benefit in capitalising it? (Seeming as the criteria may be debatable to prove)
There is still a tax saving if it is capitalised because the profit each year will be reduced due to the amortisation/depreciation. However it is not done to get a 'benefit' it is done because the accounting standards require it as showing a better representation.
Costs of research are not capitalised and are charged as an expense in the SOPL (except in so far as any non-current assets purchased are capitalised in the normal way as explained in the earlier lectures on non-current assets).
Salaries of the workers for part of the total cost of development (if they are working on development) and the total cost of development is capitalised.
The total cost is amortised/depreciated in the normal way.