The Requirements Of Ias 38

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The requirements of IAS 38 in respect of Research and Development expenditure are theoretically dubious and practically unnecessary. All such expenditure should be treated as an expense in the Income Statement and its amount disclosed in notes to the accounts. Submitted by: Muhammad Rohail Zahoor Contents Introduction 4 Types and Accounting Treatment of Intangible Assets 5 Research 5 Development 5 Accounting Treatment of Research and Development Costs 6 Explanation of the Accounting Treatment 7 Accrual Concept 7 Prudence Concept 7 Matching Concept 8 IAS 38 Explanation for the Accounting Treatment 8 Conclusion 10 References 12 Introduction Businesses spend a huge amount of money every year on the research and…show more content…
An intangible asset is an identifiable, non-monetary asset that has no physical presence. IAS 38 states that an intangible asset should be recognized initially at cost if some criteria are met such as the following: • The intangible asset needs to be identifiable which means that the organization should be able to dispose of the asset without disposing off the whole of the business at the same time. • The intangible asset is controlled by the organization. This means the organization has the power to obtain future economic benefits from the asset. • The intangible asset will generate probable future economic benefits for the organization which can either be in the form of costs reduction or in the form of increasing revenue in the future for the organization. • The cost incurred on the intangible asset can be measured reliably. If an intangible asset is not able to meet either of these criteria, it should be recognized as an expense rather than being capitalized to the statement of profit or loss when it incurs. IAS 38 therefore specifically prohibits recognizing internally generated goodwill, customer lists, publishing titles, brands, start-up costs, mastheads and training costs etc. Types and Accounting Treatment of Intangible Assets There are two types of intangible assets, those that have been purchased by organizations and secondly
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