Recording Transactions: Intangible Assets — ACCA Practice Question 06

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/used.

Full Answer

Under IAS 38, development costs can only be capitalized if the entity can demonstrate all of the PIRATE criteria: Probable future economic benefits, Intention to complete and use/sell, Reliable measurement of expenditure, Adequate technical/financial resources, Technical feasibility, and ability to use/sell the asset.

Common mistakes

Selecting options related to physical substance or external auditor approval.

Section A

BioGenetics PLC is developing a new synthetic enzyme. Which TWO of the following criteria MUST be met for the development costs to be capitalized as an intangible asset under IAS 38?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

More questions from this exam

Section A BioGenetics PLC is developing a new synthetic enzyme. Which TWO of the following criteria MUST be met for the development costs to be capitalized as an intangible asset under IAS 38?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

More questions from this exam

Section A

BioGenetics PLC is developing a new synthetic enzyme. Which TWO of the following criteria MUST be met for the development costs to be capitalized as an intangible asset under IAS 38?