Initial Recognition: Research and Development Costs
• Charge all research cost to expense. [IAS 38.54]
• Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. This means that the enterprise must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. [IAS 38.57]
Measurement Subsequent to Acquisition: Intangible Assets with Finite Lives
The cost less residual value of an intangible asset with a finite useful life should be amortised on a systematic basis over that life: [IAS 38.97]
• The amortisation method should reflect the pattern of benefits.
• If the pattern cannot be determined reliably, amortise by the straight line method.
• The amortisation charge is recognised in profit or loss unless another IFRS requires that it be included in the cost of another asset.
• The amortisation period should be reviewed at least annually. [IAS 38.104]
Goodwill arising on the acquisition should be recognised as an asset and amortised over its useful life.
Negative Goodwill
Negative goodwill must always be measured and initially recognised as the full difference between the acquirer's interest in the fair values of the identifiable assets and liabilities acquired less the cost of acquisition. [IAS 22.59]
• To the extent that it relates to expected future losses and expenses that are identified in the acquirer's acquisition plan, the negative goodwill is recognised as income when the future losses and expenses are recognised. [IAS 22.61]
• An excess of negative goodwill to the extent of the fair values of acquired identifiable nonmonetary assets is recognised in income over the average live of those nonmonetary assets. [IAS 22.62(a)]
• Any remaining excess is recognised as income immediately. [IAS 22.62(b)]
• Negative goodwill is presented...