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option 3 is development cost right and should be capitalised right. the answer say that only option 2 can be capitalised.
In accordance with IAS 38 Intangible Assets, which of the following costs would be capitalised in the financial statements of a company?
1. $1.1 million spent on researching a new raw material with the objective of reducing wastage
2. $1 million paid to acquire a patent that will have a useful life of 7 years
3. $850,000 spent on modifying a software that was internally developed two years agoHi,
No, option 3 is not allowed to be capitalised as the original costs would not have been capitalised as the software was internally generated, so there is no asset. Any additional spend would then not be capitalised either.
Even if the software had been purchased initially and capitalised then the additional spend could only be capitalised if it was to enhance the economic benefit of the asset.
Thanks
But development cost is it not an exemption to the rule of not capitalizing internally generated intangible assets
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