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May i get the guidance on this question please?.
French Co has incurred the following research and development expenditure in the financial year ended 30 November 20X9:
$
Research expenditure 40,000
Development expenditure on project A 100,000
Development expenditure on project B 32,000
Both project A and project B meet the criteria for capitalisation in IAS 38 Intangible Assets.
Project A started commercial production on 1 December 20X8 and has a life of four years.
Project B commenced in October 20X9 and has not yet started production.
What is the total charge to the statement of profit or loss in relation to intangible assets in the year ended 30 November 20X9?
The answer is 65000 (40,000 +100,000/4). But i wonder how come 32000 is not included in SPL as it is an expense because production is not started yet for Project B.
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It says “Both project A and project B meet the criteria for capitalisation in IAS 38 Intangible Assets.” When criteria are met, there is no choice but to recognise the expenditure as an asset.
As illusrated by Project A, the expense will then be the amortisation over the useful life of the asset – starting when the development asset is brought into use.
Since the development asset arising from Project B has not been brought into use, it is not yet amortised – so there is no expense. You are mistaken in suggesting the opposite.
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