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February 15, 2020 at 3:47 pm
The answer in the textbook quotes as below –
“The $ 8 million subsequently spent after completion of the research phase is development expenditure and is capitalized as an intangible non-current asset on the statement of financial position.”
In the video tutorial, Chris splits it to PPE ( $5m ) & Intangible as ( $3m ).
But my question is if the prototype is considered as a PPE, then why not the $ 3m is also added to PPE. Because, as per PPE definition, “Directly attributable costs in bringing the asset to its location and condition” should be also considered as part of PPE cost for capitalization of the asset.
July 15, 2020 at 5:32 am
I don’t think IAS 16 applies to a product that has gone through research and development, and viewed as commercially viable, except for the tangible part of the developed asset. To get the asset to its saleable condition is part of the development expenditure, which is capitalised as part of the cost of IA. For IAS 16,the company is not developing the product, the company buys the product developed by another company, so IAS 38 doesn’t apply here.
February 6, 2020 at 12:49 pm
Hi Can you please tell why we have taken 3 million in intangibles and 5 million in PPE ?
January 6, 2020 at 2:44 pm
Can i just ask where you got the £3million from under the intagibles for NCA? I appreciate the £15mil as it is a patent but I’m unsure in regards to the £3million.
August 10, 2019 at 10:48 am
I got kind of confuses that “development expenditure must be capitalised when it meets all the criteria” but here, $5m was spent on the functioning prototype, $3m was on getting the product into a safe and saleable condition. Both expenditure occurred before “TRUMP CV”?
July 3, 2019 at 11:00 pm
Hello Sir, you are awesome! the way you connect Cashflows and prepare us for the future topic is highly appreciable.
February 3, 2019 at 8:24 am
Hello Sir, I have a question. Why functioning prototype’s cost of $5M classified as PPE and separated from Intangible asset ?
May 20, 2019 at 2:28 pm
It is going to be used as a tangible asset to help generate future profits and so classified as PPE.
September 18, 2018 at 1:42 pm
Hi, Shouldn’t we be capitalising the initial investigative expenses? Though it seems like a research thing, but it can be measured in cost( $6 m) with probable feasibility which are the only two arguments for not capitalising research generally.
December 31, 2018 at 1:25 pm
No, the costs in the investigative phase are research costs and are expenses. Only once we then have determined that there is future economic benefit can the costs be capitalised.
July 8, 2018 at 7:41 pm
Which cost are you talking about please? Both the purchase of the patent and development costs can be capitalised per IAS 38.
July 7, 2018 at 10:49 pm
I thought the criteria as we dont capitalise unless asset it ready to use…but we still put it in a SOFP?
May 26, 2019 at 8:18 pm
I believe term “ready for use” refers to starting date of amortization of the intangible asset. As expenditure that met recognition criteria have been inccured during the year, these should be recongnized in the SOFP per IAS 38.
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