Skip to contentSkip to search

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

QualificationExamRelationshipPeriod
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

Related terms