Research, development, amortisation and other defined terms

Learning objectives

• Distinguish the definitions of research and development and the notion of depreciable amount.L1, L2

Normative references

• IAS 38 §8Definitions specific to the Standard, in particular: intangible asset, asset, amortisation, carrying amount, cost, depreciable amount, research, development, entity-specific value, impairment loss, monetary assets, residual value and useful life; fair value is defined by reference to IFRS 13; the definition of an active market no longer appears in IAS 38 (deleted by IFRS 13) and the Standard relies on IFRS 13, Appendix A. Intangible asset: an identifiable non-monetary asset without physical substance. Asset: a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Research: original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge. Development: the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products, processes, systems or services before the start of commercial production or use. Monetary assets: money held and assets to be received in fixed or determinable amounts of money.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

8 questions

• Which of these descriptions matches development as defined in IAS 38?L1
• True or false? Under IAS 38, research refers to original work, carried out according to a plan, whose aim is to obtain new scientific or technical insight and understanding.L1
• True or false? The depreciable amount of an intangible asset is equal to its cost, without taking its residual value into account.L1
• In IAS 38, which term refers to spreading the depreciable amount of an intangible asset methodically over its useful life?L1
• The paint manufacturer Colorine applies the results of earlier work to design and test the prototype of a new anti-corrosion paint, before any commercial launch. Under IAS 38, this activity is:L2
• The Heliade laboratory launches a planned programme of experiments to discover new properties of superconducting materials, with no specific product or process in view. How should this activity be described under IAS 38?L2
• Which of the following statements about the terms defined by IAS 38 are correct?L1
• Velmor, a manufacturer of industrial pumps, carries out the following activities. Which ones are development under IAS 38?L2