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Sir, Are Research and Development expenditure like deferred revenue expenditure?
How on earth can it be revenue, when it is expenditure?
I think it will help you to watch my free lectures on this!
Sir, isn’t there a concept called revenue expenditure, an expenditure which is not capital but revenue in nature, but we write it off in more than one accounting period, basically it is deferred, we capitalise them and call it fictitious assets?
Are you getting me sir?I understand you now 🙂
However, research is revenue expenditure (because you have to charge it as an expense in the year it is incurred).
Development expenditure (subject to the conditions) is capital expenditure (it is just like buying a machine and then depreciating it).
(And it is not a fictitious asset – it is an intangible asset, but it isn’t fictitious)Delta Co has capitalised development costs brought forward of $420 000 at 1 jan 20X9. These costs have a remaining useful life of 4 years. During the year ended 31 dec 20X9 the following expenditure has been incurred on project A:
Development costs. $ 65000
Research Costs. $22000All research and development was completed in July 20X9 on project A Delta Co commenced production during the month. Delta Co applies IAS 38 Intangible Assets guidance on capitalisation of relevent costs. An amortisation period. Of four years is deemed appropriate. Delta Co’s policy is to charge a full year’s amortisation in the year of capitalistion of a project.
What should the total amortisation expense be for the year ended 31 dec 20X9 ?Please do not set test questions and expect an answer.
You must have an answer in the same book in which you found the question (if not, then you are wasting your time with the book – you should be using a Revision Kit from one of the ACCA approved publishers).
Say which bit of the answer you are not clear about and then I will try and help.
(I assume that you have watched my free lectures on Research and Development)
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