Amortisation of development costs
Capitalised development expenditure is amortised once the resulting asset is available for use, over its estimated useful life. Only expenditure meeting IAS 38 development recognition criteria becomes part of the asset. Costs expensed before the criteria were met are not reinstated later. The amortisation charge normally reduces profit and increases accumulated amortisation; impairment is considered separately.
Worked example
Qualifying development costs of $80,000 create a product ready for use on 1 July with a four-year life. Six months’ straight-line amortisation is $10,000.
Common mistake
Do not start amortisation merely when research starts, or defer it until cash from the first customer arrives.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
