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

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

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 

'

Amortisation

 is the systematic allocation of the depreciable amount of an intangible asset over 

its useful life.'  

 

'

Depreciable amount 

is the cost of an asset, or other amount substituted for cost, less its 

residual value.' 

 

'

Useful life 

is: 

– 

the period over which an asset is expected to be available for use by an entity; or 

– 

the number of production or similar units expected to be obtained from the asset by an 

entity.' 

    (IAS 38, para. 8) 

 

Although these definitions are usually well understood, in practice it may not be so easy to identify the 

activities encompassed by R&D and the dividing line between the categories may be indistinct. 

Identification often depends on the type of business involved, the projects it undertakes and how it is 

organised. 

The standard gives examples of activities which might be included in either research or development,  

or which are neither but may be closely associated with both. 

 

Research 

– 

Activities aimed at obtaining new knowledge 

– 

The search for applications of research findings or other knowledge 

– 

The search for product or process alternatives 

– 

The formulation and design of possible new or improved product or process alternatives 

(IAS 38, para. 56) 

 

Development 

– 

The design, construction and testing of pre-production prototypes and models 

– 

The design of tools, jigs, moulds and dies involving new technology 

– 

The design, construction and operation of a pilot plant that is not of a scale economically 

feasible for commercial production 

– 

The design, construction and testing of a chosen alternative for new/improved materials 

 

(IAS 38, para. 59) 

2.3 Components of R&D costs 

R&D costs will include all costs that are directly attributable to R&D activities, or that can be allocated