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ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation

Which of the following items must be recognised as an intangible asset in the statement of financial position of the entity that incurred the cost, under IAS 38 Intangible Assets?

Development expenditure that meets all the IAS 38 criteria must be capitalised as an intangible asset. Internally generated brands, staff training and research costs cannot be recognised and are expensed when incurred, because they are not reliably measurable or controlled.

  1. AInternally generated brand name built up through advertising
  2. BDevelopment expenditure that meets all of the IAS 38 capitalisation criteriaCorrect
  3. CCosts of staff training to improve productivity
  4. DResearch expenditure on a new product line

Explanation

IAS 38 requires development expenditure to be capitalised once the criteria (technical feasibility, intention and ability to complete and use or sell, future economic benefits, resources, reliable measurement) are met. Internally generated brands, training costs and research costs must be expensed as incurred.

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