Acca financial Accounting (FA) Study Text ac ca (FA)

Accounting treatment of research and development  

When an entity undertakes research and development activity, expenditure is 

incurred with the intention of producing future economic benefits i.e. increased 

sales revenues and profits. 

The accounting issue is therefore whether these costs should be expensed to 

the statement of profit or loss or capitalised as an intangible asset on the 

statement of financial position to match against future benefits arising. 

Research 

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All research expenditure should be written off to the statement of profit or 

loss as it is incurred. This is in compliance with the prudence concept. 

•

 

Research expenditure does not directly lead to future benefits and 

therefore it is not possible to follow the matching concept. 

•

 

Any capital expenditure on research equipment (property, plant and 

equipment) should be capitalised and depreciated as normal in 

accordance with IAS 16. 

 

 

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