I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

A – Its Ability to use or sell the intangible asset: customers have already placed advanced orders 

for the final product, so Y Co's ability to use the asset is clear. 



  

T – The Technical feasibility of completing the intangible asset so that it will be available for use 

or sale: the capabilities of the product were demonstrated to customers, so the technical 

feasibility is assured. 



  

E – Its ability to measure reliably the Expenditure attributable to the intangible asset during its 

development: Y Co has a reliable estimation of costs to date and to complete. 

Hence the costs of $280,000 incurred to date should be capitalised as an intangible asset in the 

statement of financial position. Once the material is ready for use, the intangible asset should be 

amortised over its useful life.  

Project B 

This project meets most of the criteria discussed above which would enable the costs to be carried 

forward; however, it fails on the availability of adequate resources to complete the project. As such, the 

costs cannot be capitalised and should be expensed to the statement of profit or loss.  

Once funding is obtained the situation can then be reassessed and future costs may be capitalised. 

Project C 

This is a research project according to IAS 38, ie original and planned investigation undertaken with the 

prospect of gaining new scientific or technical knowledge or understanding. 

There is no certainty as to its ultimate success or commercial viability and therefore it cannot be 

considered to be a development project. IAS 38 therefore requires that costs be written off as incurred. 

 

 

3

  Disclosure in financial statements 

IAS 38 requires both numerical and narrative disclosures for intangible assets.   

The disclosure requirements in IAS 38 are extensive and include both numerical and narrative disclosures. 

The financial statements should show a reconciliation of the carrying amount of intangible assets at the 

beginning and at the end of the period. The reconciliation should show the movement on intangible 

assets, including: 

 Additions 

 Disposals 

 

Reductions in carrying amount  

 Amortisation 

 

Any other movements 

(IAS 38, para. 118) 

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