Question

Discuss the accounting treatment and tax treatment of Research and development (R&D) activities in Australia? according to both Australian IFRS & GAAP

Answer 1

GAAP

cost of R&D can be treated as expense and charged to profit and loss in the period ini which they are incurred or be deferred and amoritsied over future periods in order to match the costs of the activities with the benefits which derive from them

cost incurred to be deferred only to the exten future benefitsare expected to be deirved from it beyond any resanolabe doubut

IFRS

IFRS does not contain any specific requlations for accounting treatment of R&D expenses.instead general regulations relating to reporting intangible assets are to be applied in thisc ase

R&D cost are expened out, while ifrs has broad based guidnance that requires the compnay to capitalaise development expenditure incuding internal costs when certain criteria are met

based on these criteria interanlly developed intagngilbe assets are capitalised and amortised

tax treatment of austrailia

R&D tax incetive encourages copmanies to engage in R&D benefitting austraila, by providig tax offset for eligiible R&D activies , it has two core components

refundable tax offset for certain eliginble entities whose aggregated turnover is less tthan 20 million $

a non refundable tax offfset for all other eligible entities