CAPITULO 12 INTERMEDIA - Chapter 12 Intangible Assets...

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As indicated, all costs incurred in the research phase are expensed as incurred. Once a project moves to the development phase, certain development costs are capitalized. Specifically, development costs are capitalized when certain criteria are met, indicating economic viability indicates that the project is far enough along in the process such that the economic benefits of the R&D project will flow to the company. Therefore, de- velopment costs incurred from that point forward meet the recognition criteria and should be recorded as an intangible asset. In summary, companies expense all research phase costs and some development phase costs. Certain development costs are capitalized once economic viability criteria are met. IFRS identifies several specific criteria that must be met before development costs are capitalized (which we discuss in more detail later in the chapter). 1 This IFRS Supplement provides expanded discussions of accounting guidance under In- ternational Financial Reporting Standards (IFRS) for the topics in Intermediate Accounting. The discussions are organized according to the chapters in Intermediate Accounting (13 th or 14 th Editions) and therefore can be used to supplement the U.S. GAAP requirements as presented in the textbook. Assignment material is provided for each supplement chapter, which can be used to assess and reinforce student understanding of IFRS. INTERNALLY CREATED INTANGIBLES Businesses frequently incur costs on a variety of intangible resources, such as scientific or technological knowledge, market research, intellectual property, and brand names. These costs are commonly referred to as research and development (R&D) costs. Intan- gible assets that might arise from these expenditures include patents, computer soft- ware, copyrights, and trademarks. For example, Nokia (FIN ) develop its cell phones, resulting in patents related to its technology. In determining a sufficiently advanced stage to be considered economically viable. To perform this assessment, Nokia evaluates costs incurred during the research phase and the devel- opment phase . Illustration 12-1 indicates the two stages of research and development activities, along with the accounting treatment for costs incurred during these phases. 1 IFRS also prohibits recognition of intangible assets such as internally generated brands, mastheads, and customer lists. These expenditures are similar to other costs to develop the business as whole; therefore, they do not meet the separately identifiable criterion. [1] ILLUSTRATION 12-1 Research and Development Stages Beginning of Project Ready for Sale or Use $$$ Expenditures $$$ Research Phase Development Phase Expense Capitalize Economic Viability CHAPTER 12 INTANGIBLE ASSETS Chapter 12 Intangible Assets · 12–1
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This note was uploaded on 02/02/2012 for the course ACCO 3350 taught by Professor Alvarez during the Spring '11 term at American International.

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CAPITULO 12 INTERMEDIA - Chapter 12 Intangible Assets...

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