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

P – How the intangible asset will generate Probable future economic benefits. (This is 

demonstrated by the existence of an external market or by how the asset will be useful to the 

business if it is to be used internally.) 

 

I – Its Intention to complete the intangible asset and use or sell it 

 

R – The availability of adequate technical, financial and other Resources to complete the 

development and to use or sell the intangible asset 

 

A – Its Ability to use or sell the intangible asset 

 

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

or sale 

 

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

development 

(IAS 38, para. 57) 

There is also an important point about the carrying amount of the asset and recoverability. The 

development costs of a project recognised as an asset should not exceed the amount that it is probable 

will be recovered from related future economic benefits, after deducting further development costs, 

related production costs, and selling and administrative costs directly incurred in marketing the product. 

2.5 Amortisation of development costs 

Once capitalised as an asset, development costs must be amortised and recognised as an expense to 

match the costs with the related revenue or cost savings. The amortisation will begin when the asset is 

available for use. 

Amortisation must be done on a systematic basis to reflect the pattern in which the related economic 

benefits are recognised. 

(IAS 38, para. 97) 

It is unlikely to be possible to match exactly the economic benefits obtained with the costs which are 

held as an asset simply because of the nature of development activities. The entity should consider the 

period of time over which the product/process is expected to be sold/used. 

 EXAM FOCUS POINT 

The recognition criteria can be summarised by the mnemonic PIRATE which makes it easier to learn 

for your exam. 

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