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hi sir mike,
i jst want to knw abt research and most importantly development cost…what is development costs ?…if we say that its a cost which occur on developing a Tangible and Intangible product both, will it be Right ? or it is a cost which occur only on development of Intangible thing? ..can u plz give me easy examples of development cost. I am bit confused that anything which we re developing today will come in tangible form later …so kindly help me out with thisSimilarly same case with research, does research include research on both tangible and intangible products ?
Much Regards.
Research – tangible or intangible – it makes no difference. Research costs are expensed as they are incurred – there’s no concept of capitalising research costs
Development costs?
Here’s an extract from IAS 38:
“Initial recognition: research and development costs
Charge all research cost to expense.
Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established.
This means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits.
If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only.”
Development expenditure is that expenditure that is incurred following management’s decision that the project is feasible and taking the embryonic idea on into a marketable commodity
Is that better?
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