ExpertMedium2 marksMultiple Choice
ACCA · Question 10 · Recording transactions and events
Section A
Under IAS 38 Intangible Assets, which TWO of the following criteria must be met before development costs can be capitalized?
Section A
Under IAS 38 Intangible Assets, which TWO of the following criteria must be met before development costs can be capitalized?
Answer options:
A.
The technical feasibility of completing the intangible asset
B.
The project must have already generated revenue
C.
The intention to complete the intangible asset and use or sell it
D.
The costs must be related to pure, theoretical research
How to approach this question
Recall the PIRATE criteria for capitalizing development costs: Probable future economic benefits, Intention to complete, Reliable measurement of costs, Adequate resources, Technical feasibility, Expected to be profitable.
Full Answer
IAS 38 requires specific criteria to be met to capitalize development costs (often remembered by the mnemonic PIRATE). Technical feasibility and the Intention to complete are two of these criteria. Research costs are always expensed.
Common mistakes
Confusing research and development phases.
Practice the full ACCA FA — Financial Accounting Practice Exam 1
65 questions · hints · full answers · grading
More questions from this exam
Q01**Section A**
BioGenix Ltd, a pharmaceutical startup, has spent $2 million on researching a new ...MediumQ02**Section A**
Which of the following bodies is primarily responsible for issuing International F...EasyQ03**Section A**
SolarTech Manufacturing recently upgraded its primary assembly line. Which TWO of ...MediumQ04**Section A**
AgriGrow Ltd sells specialized farming equipment. A customer purchases a tractor f...MediumQ05**Section A**
Oceanic Logistics provides shipping services. They issue an invoice for $10,000 to...Medium