Research and development expenditure recognised as an expense

Learning objectives

• Calculate the amount of research and development expenditure recognised as an expense to be disclosed in the notes.L2
• Identify the requirement to disclose research and development expenditure recognised as an expense.L2

Normative references

• IAS 38 §126Aggregate amount of research and development expenditure recognised as an expense during the period.
• IAS 38 §127For the disclosure required by paragraph 126, research and development expenditure comprises all expenditure that is directly attributable to research or development activities; the nature of the costs to be included (costs included and excluded) is determined by reference to paragraphs 66 and 67.

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

10 questions

• What does IAS 38 require entities to disclose about research and development expenditure that is not capitalised?L2
• In 20X1, Ramee incurs 90,000 of research expenditure, 60,000 of development expenditure before the date on which the recognition criteria are first met, and 40,000 of development expenditure after that date. What amount of research and development expenditure recognised as an expense must it disclose in its notes for 20X1?L2
• During the year, Ombrevalle incurred {research_costs} of research expenditure on new materials, {development_before_criteria} of development expenditure on a sensor before all the capitalisation criteria were demonstrated, then {development_capitalised} of development expenditure capitalised once the criteria were met. It also incurred {launch_advertising} of advertising for the sensor launch. What amount of research and development expenditure recognised as an expense must it disclose?L2
• In 20X2, the video game publisher Kalmira carried out an exploratory study of graphics engines for {research_costs}. It then developed a new game: {development_before_criteria} was incurred from January to April, before all the criteria were demonstrated on 1 May, and {development_capitalised} was capitalised from May to December. Finally, training the support teams for the new game cost {staff_training}. What amount of research and development expenditure recognised as an expense in 20X2 must be disclosed?L2
• Tarvelle carried out three internal projects. For project A, it could not distinguish the research phase from the development phase; expenditure amounts to {undistinguished_project}. Project B, a basic research project, cost {research_costs}. Project C has met all the development criteria since the start of the year; its expenditure of {development_capitalised} was capitalised. What amount of R&D recognised as an expense must be disclosed?L2
• The technical centre of the Brunelles farming cooperative spent {research_costs} testing yeast strains in the laboratory. Its harvest traceability tool, which meets the capitalisation criteria, gave rise to {development_capitalised} of capitalised expenditure. A connected irrigation project cost {undistinguished_project}, and the cooperative cannot separate what relates to research from what relates to development. What total of R&D expensed does the cooperative mention in its notes?L2
• Glendor capitalises all its development expenditure, which meets the criteria from the start of the projects, and expenses its research expenditure. Its finance director believes no disclosure of R&D expensed is necessary. Is he right?L2
• Velcourt's draft notes mention 70,000 of research expenditure recognised as an expense. However, during the year, Velcourt also expensed 30,000 of development expenditure incurred before the capitalisation criteria were demonstrated, then capitalised 90,000 of development. Which amount must the notes disclose?L2
• In 20X1, Ardoval expensed 50,000 of development expenditure on a medical device. In 20X2, it incurs 35,000 of research on another device and 20,000 of development on the medical device before the capitalisation criteria are demonstrated in March 20X2. Management proposes to reinstate the 50,000 of 20X1 as an asset. What amount of R&D recognised as an expense does Ardoval disclose for 20X2?L2
• During 20X3, Ilvanor incurred the following expenditure: salaries of its laboratory researchers, {research_salaries}; materials consumed in research work, {research_materials}; expenditure directly attributable to a development project incurred before the recognition criteria were met, {pre_criteria_development}; general administrative overheads of the head office, not directly attributable to these activities, {general_overheads}; expenditure on the same project incurred after the criteria were met and recognised as an asset, {capitalised_development}. What amount of research and development expenditure recognised as an expense should Ilvanor disclose for 20X3?L2