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Thank you for your responses they have been really useful.
Pg 210.
Non-current assets – intangible:In addition to the capitalised development expenditure (of $20 million), further research and development costs were incurred on a new project which commenced on 1 October 2008. The research stage of the new project lasted until 31 December 2008 and incurred $1.4 million of costs. From that date the project incurred development costs of $800,000 per month. On 1 April 2009 the directors became confident that the project would be successful and yield a profit well in excess of its costs. The project is still in development at 30 September 2009.
Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development is charged to cost of sales.
Below is part of the answer related to the above question. I would like to know what happens with these development expenses, is their a journal entry or do they go into the p and L or SFP?
Development expenditure
1.10.08 – 31.12.08 1,400
1.1.09 – 31.3.09 2,400
1.4.09 – 30.9.09 4,800Thanks.
1,400 is research and is written off to profit or loss (cost of sales)
2,400 is development, but there is not yet ant certainty of commercial viability so this too is written off to profit or loss (cost of sales)
4,800 – we now have certainty of commercial viability so this amount is capitalised (intangible asset … and not amortised because the development stage is still in progress
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