Skip to content

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

Zeta Co incurred the following costs on a new process during the year ended 31 December 20X5: research $40,000 from 1 January to 31 March; development costs of $15,000 per month from 1 April to 31 December. The IAS 38 criteria were first met on 1 July 20X5. What amount should be charged to profit or loss for the year in respect of these costs?

The charge to profit or loss is $85,000. Research of $40,000 and pre-criteria development of $45,000 (April to June) are expensed, while the $90,000 spent from July, after the criteria were met, is capitalised as an intangible asset.

  1. A$40,000
  2. B$85,000Correct
  3. C$175,000
  4. D$135,000

Explanation

Research of $40,000 is expensed. Development costs from 1 April to 30 June are 3 x $15,000 = $45,000, also expensed because the criteria were not yet met. Total expense = $85,000. Capitalised: 6 x $15,000 = $90,000 (July to December). Check: 40,000 + 45,000 + 90,000 = 175,000 total spend.

Did you get it right without looking?

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

Practise Intangible non-current assets and amortisationFree diagnostic mock

More Intangible non-current assets and amortisation questions