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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Correct treatment for administrative cost (IAS 38 Intangible assets)
According to IAS 38 (Intangible assets), what is the correct treatment for administrative costs that is incurred in negotiating the contract?
Suppose, I am the accountant for company A. Copany A has acquired a patent for $ 10 m which gives it the exclusive right to manufacture a waste disposal system for a four- year period. This $ 10 m includes $ 2 m worth of administrative costs that were spent solely on negotiating the contract and facilitating the purchase of this patent. So should I capitalize $ 8 m or $ 10 m?
The directly attributable costs will be capitalised so I’d capitalise the full $10m.