CHAP9 F3

According to IAS 38 Intangible assets, which of the following statements about research and
development expenditure are correct?
1 Research expenditure, other than capital expenditure on research facilities, should be recognised
as an expense as incurred.
2 In deciding whether development expenditure qualifies to be recognised as an asset, it is
necessary to consider whether there will be adequate finance available to complete the project.

3 Development expenditure recognised as an asset must be amortised over a period not exceedingfive years.

• 1,2,3

• 1,2

• 1,3

• 2,3

According to IAS 38 Intangible assets, which of the following statements about research and
development expenditure are correct?
1 If certain conditions are met, an entity may decide to capitalise development expenditure.
2 Research expenditure, other than capital expenditure on research facilities, must be written off as
incurred.
3 Capitalised development expenditure must be amortised over a period not exceeding 5 years.
4 Capitalised development expenditure must be disclosed in the statement of financial position
under intangible non-current assets.
1

• 1,2,4

• 1,3

• 2,4

• 3,4

According to IAS 38 Intangible assets, which of the following statements concerning the accounting
treatment of research and development expenditure are true?
1 Development costs recognised as an asset must be amortised over a period not exceeding five
years.
2 Research expenditure, other than capital expenditure on research facilities, should be recognised
as an expense as incurred.
3 In deciding whether development expenditure qualifies to be recognised as an asset, it is
necessary to consider whether there will be adequate finance available to complete the project.

4 Development projects must be reviewed at each reporting date, and expenditure on any project
no longer qualifying for capitalisation must be amortised through the statement of profit or loss
and other comprehensive income over a period not exceeding five years.

• 1,4

• 2,4

• 2,3

• 1,3

According to IAS 38 Intangible assets, which of the following statements is/are correct?
1 Capitalised development expenditure must be amortised over a period not exceeding five years.
2 If all the conditions specified in IAS 38 are met, development expenditure may be capitalised if
the directors decide to do so.
3 Capitalised development costs are shown in the statement of financial position under the heading
of non-current assets.

4 Amortisation of capitalised development expenditure will appear as an item in a company'sstatement of changes in equity.

• 3

• 2,3

• 1,4

• 1,3

According to IAS 38 Intangible assets, which of the following are intangible non-current assets in the
financial statements of Iota Co?
1 A patent for a new glue purchased for $20,000 by Iota Co
2 Development costs capitalised in accordance with IAS 38
3 A licence to broadcast a television series, purchased by Iota Co for $150,000

4 A state of the art factory purchased by Iota Co for $1.5million

• 1,3

• 1,2,3

• 2,4

• 2,3,4

According to IAS 38 Intangible assets, which of the following statements about intangible assets are
correct?
1 If certain criteria are met, research expenditure must be recognised as an intangible asset.
2 If certain criteria are met, development expenditure must be capitalised

3 Intangible assets must be amortised if they have a definite useful life

• 2,3

• 1,3

• 1,2

• all 3 statements are correct

According to IAS 38 Intangible assets, which of the following statements concerning the accounting
treatment of research and development expenditure are true?
1 If certain criteria are met, research expenditure may be recognised as an asset.
2 Research expenditure, other than capital expenditure on research facilities, should be recognised
as an expense as incurred.
3 In deciding whether development expenditure qualifies to be recognised as an asset, it is
necessary to consider whether there will be adequate finance available to complete the project.
4 Development expenditure recognised as an asset must be amortised over a period not exceeding
five years.

5 The financial statements should disclose the total amount of research and development
expenditure recognised as an expense during the period

• 1,4,5

• 2,4,5

• 2,3,5

• 2,3,4

According to IAS 38 Intangible assets, which of the following statements are correct?
1 Research expenditure should not be capitalised.
2 Intangible assets are never amortised.

3 Development expenditure must be capitalised if certain conditions are met.

• 1,3

• 1,2

• 2,3

• All three statements are correct

  
  

What is the purpose of amortisation?

• To allocate the cost of an intangible non-current asset over its useful life

  
  

• To ensure that funds are available for the eventual purchase of a replacement non-current asset

  
  

• To reduce the cost of an intangible non-current asset in the statement of financial position to itsestimated market value

  
  

• To account for the risk associated with intangible assets

  
  

Which of the following items (that all generate future economic benefits, and whose costs can be
measured reliably), is an intangible non-current asset?
1 Computer hardware owned by a business
2 Operating software that operates the computer hardware in (1)
3 A patent bought by a business
4 An extension to an office building owned by a business

• all 4 items

• 1,2,4

• 3 only

• 1,2