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 

 

178

 

 

Intangible assets are non-current assets with no physical substance. 

 

Expenditure on research must always be written off in the period in which it is incurred. (IAS 38, 

para. 54) 

 

If the criteria laid down by IAS 38 are satisfied, development expenditure must be capitalised as an 

intangible asset. If it has a finite useful life, it should then be amortised over that life. If the criteria in 

IAS 38 are not satisfied, development expenditure must be written off in the period in which it is 

incurred. 

 

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

 

 

1 

The required accounting treatment for expenditure on research is to capitalise it and carry it forward as 

an asset. True or false?  

2 

Which of the following items is an intangible asset? 

A Land 

B Patents 

C Buildings 

D Van 

3 

Fill in the blank. 

 

………….…. expenditure is incurred in the application of knowledge for the production of new products. 

The following information is relevant for questions 4 and 5. 

 

XY Co has development expenditure of $500,000. Its policy is to amortise development expenditure at 

2% per annum. Accumulated amortisation brought forward is $20,000.  

4 

What is the charge in the statement of profit or loss for the year's amortisation? 

A $10,000 

B $400 

C $20,000 

D $9,600 

5 

What is the amount shown in the statement of financial position for development expenditure? 

A $500,000 

B $480,000 

C $470,000 

 D 

$490,000 

 

 

 

 

 

 

 

 

 

 

 

 

QUICK QUIZ

CHAPTER ROUNDUP 

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CHAPTER 9  

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  INTANGIBLE NON-CURRENT ASSETS 

 

179 

1 

False. Research expenditure is always written off as it is incurred. 

2 

B 

All the others are tangible assets. 

3 

Development expenditure is incurred in the application of knowledge for the production of new products. 

4 A 2% 

 $500,000 = $10,000. 

5 

C 

Development expenditure b/f is $480,000 (cost $500,000 – accumulated depreciation 

$20,000), then deduct annual depreciation of $10,000 to give figure c/f of $470,000. 

 

 

 

 

 

 

 

 

Now try ... 

 

Attempt the questions below from the Practice Question Bank 

 Number 

 

 

 

 

 

Qs 40 – 42  

 

 

 

 

 

 

ANSWERS TO QUICK QUIZ 

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