ExpertMedium2 marksMultiple Choice
ACCA · Question 13 · Recording transactions and events
Under IAS 38 Intangible Assets, which of the following criteria MUST be met for development costs to be capitalized? (Select all that apply)
Under IAS 38 Intangible Assets, which of the following criteria MUST be met for development costs to be capitalized? (Select all that apply)
Answer options:
A.
Technical feasibility of completing the intangible asset
B.
The project is in the initial research phase
C.
Intention to complete the intangible asset and use or sell it
D.
The asset has been physically completed
How to approach this question
Recall the PIRATE criteria for capitalizing development costs under IAS 38.
Full Answer
Under IAS 38, development costs can only be capitalized if strict criteria are met (often remembered by the acronym PIRATE). These include the technical feasibility of completion and the intention to complete and use/sell it. Research costs are always expensed.
Common mistakes
Thinking research costs can be capitalized if they are likely to lead to a product.
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