Skip to content

ACCA Strategic Professional · Strategic Business Reporting (International) · Non-current assets

Zentra Co is developing a new battery. At 1 March the project met all the IAS 38 development capitalisation criteria except that the company had not yet shown it had adequate financial resources to complete it. Costs of $400,000 were incurred from 1 March to 31 May. On 1 June, funding was secured and all criteria were met; costs of $250,000 were then incurred to 30 September. What amount is recognised as an intangible asset at 30 September?

The asset is $250,000. Under IAS 38, development expenditure is capitalised only from the date all recognition criteria are first demonstrated. Costs incurred earlier, here $400,000, were expensed as incurred and cannot be reinstated as an asset afterwards.

  1. A$650,000
  2. B$250,000Correct
  3. C$400,000
  4. D$0 because development has not yet finished

Explanation

Development costs are capitalised only from the date all the IAS 38 criteria are first met, which is 1 June. Earlier costs of $400,000 were expensed and cannot be reinstated later. The $650,000 option wrongly capitalises the pre-criteria costs.

Did you get it right without looking?

One question tells you little. A timed set on Non-current assets shows your real accuracy, how long you take and where you lose marks.

Practise Non-current assetsFree diagnostic mock

More Non-current assets questions