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

Zenith Co incurred the following costs in the year ended 31 December 20X5: research into a new process $90,000; development costs of $60,000 incurred before the IAS 38 capitalisation criteria were met; and development costs of $150,000 incurred after all criteria were demonstrated. What amount is capitalised as an intangible asset at 31 December 20X5, before any amortisation?

$150,000 is capitalised. Research costs are always expensed, and development costs incurred before the IAS 38 criteria are met are also expensed and cannot be capitalised later. Only development expenditure incurred after all the criteria are demonstrated is recognised as an intangible asset.

  1. A$150,000Correct
  2. B$210,000
  3. C$300,000
  4. D$60,000

Explanation

Research costs ($90,000) are always expensed. Development costs incurred before the criteria are met ($60,000) are expensed and cannot be reinstated later. Only the $150,000 incurred after the criteria were met is capitalised. $210,000 wrongly includes the pre-criteria development costs.

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