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Problem: Intangibles Background During January 2010, Sophisticated Software, Inc.

Problem: Intangibles

During January 2010, Sophisticated Software, Inc. (SSI), a well-established and well-funded software company, began researching and developing a new and innovative software program for aircraft design to sell to its existing customers through its sales force.
On January 15, 2010, SSI purchased software to be used specifically in the research process. This particular software had an alternative use in that it could be licensed to and used by others. However, SSI’s intention was only to use this software in the research and development of this particular software product.
On June 30, 2011, SSI completed all planning, designing, coding and testing activities that are necessary to establish that a product can be produced to meet its design specifications, including functions, features and technical performance requirements. Also at that date, SSI had determined that all high-risk uncertainty issues had been resolved.
On August 10, 2011, SSI was issued a patent for the product. By August 31, 2011, SSI had developed a business plan, including identification of a ready market for the product, and a commitment of resources to ready the product for market.
On December 31, 2011, the software is ready for market and a marketing launch event is held.
Tracked costs Amount
Internal R&D costs – January 2010 through June 2011 $100,000
Internal R&D costs – July through August 2011 $80,000
Purchased software $6,000
Legal fees to patent the product $2,000
Internal R&D costs – September through December 2011 $250,000
Preproduction costs (not incurred in the design, construction and testing of pre-production or pre-use prototype) $40,000
Marketing launch $25,000

Provide an analysis of the costs SSI should capitalize using US GAAP and IFRS.

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Dear Student Please find... View the full answer


Internal R & D cost-Jan 2011 to
June 2011 US GAAP
Not to be capitalized.
Capitalization takes
place only after
establishing technical
feasibility. IFRS

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