Accounting for Transactions — ACCA Practice Question 04

How to approach this question

Recall the PIRATE acronym for capitalizing development costs: Probable future economic benefits, Intention to complete, Reliable measurement of costs, Adequate resources, Technical feasibility, Expected to be profitable/used.

Full Answer

IAS 38 requires six criteria to be met to capitalize development costs (often remembered by the acronym PIRATE). Technical feasibility and the Intention to complete are two of these mandatory criteria. Reliable measurement applies to the costs incurred, not the final fair value.

Common mistakes

Confusing the reliable measurement of costs with the reliable measurement of fair value.

SECTION A

AgriTech Solutions is developing a new automated irrigation system. Under IAS 38 Intangible Assets, which TWO of the following criteria MUST be demonstrated by AgriTech to capitalize the development costs?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 3

More questions from this exam

SECTION A AgriTech Solutions is developing a new automated irrigation system. Under IAS 38 Intangible Assets, which TWO of the following criteria MUST be demonstrated by AgriTech to capitalize the development costs?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 3

More questions from this exam

SECTION A

AgriTech Solutions is developing a new automated irrigation system. Under IAS 38 Intangible Assets, which TWO of the following criteria MUST be demonstrated by AgriTech to capitalize the development costs?