Intangibles Essay Questions (Research and Development)
Intangible assets are defined as those non-monetary assets that cannot be seen, touched or physically measured and which are created through time and/or effort. One obvious difference between UK and International regulations in the area of Intangible assets is the continuing existence of a separate standard in the UK on Research and Development, SSAP 13. The original international standard, IAS 9, on this specific intangible asset has been superseded as part of the development of IAS 38, which covers all intangible assets.
Research is defined as ‘original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding’. Development is defined as ‘application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production or use’ Development is more closely related to the earnings process than research.
Although IAS 38 will remove the discretion of directors it has introduced more rigorous criteria before costs may be classified as "development" within its meaning. To satisfy the criteria an entity must be able to demonstrate all of the following:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• its intention to complete the intangible asset and use or sell it;
• its ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits. Among other things, the entity shall demonstrate ...