Under IFRS and US GAAP, how should preliminary research expenditures incurred during the initial phase of an internal project be treated?
ACapitalized as an Intangible Asset
BExpensed immediately in the Income Statement
CDeferred and amortized over 10 years
DRecorded as a Contingent Asset
Explanation
• According to accounting standards (IAS 38 / US GAAP), all research phase expenditures must be expensed immediately as incurred.
• Development costs may only be capitalized as intangible assets after technical and financial feasibility is formally established.
• This strict treatment avoids overstating unproven intangible assets on balance sheets.
Exam Relevance
- Topic: Financial Accounting
- Subtopic: Intangible Assets
No Comments