Question

Explain the trade-off between stringent recognition criteria for R&D aimed at enhancing decision usefulness versus the possible social impacts of the current IAS 138/AASB 138 R&D rules.

Answer 1

As per AASB 138 – This standard applies relates to expenditure on advertisement, training , research and development activities, Research and development activities are directed to the development of knowledge

R&D expenditure that relates to an in process research or development project acquired separately or in a business combination and recognition as an intangible assets

Research phase as per AASB 138 – No intangible asset arising from research shall be recognised . Expenditure on research shall be recognised as an expenses when it is incurred .Where as development phase represents – it can be recognised an Intangible asset arising from development shall be recognised and cover following points:

a) Technical feasibility – Intangible asset which will be available for use of sale

b) Intention to complete teh intangible asset and use or sell

c) Most important point to note that how the intangible asset will generate probable future economic benefits

d) The availability if adequate technical and other resources to complete the development and use or sell the intangible asset

e) Reliable measurement

Point to note that development phase of an internal project , that the asset will generate probable future economic benefit . this is because the development phase of a project is further advance that the research phase