IAS 38, Intangible Assets, provides guidance on the accounting for intangible assets, including research and development (R&D) costs. According to IAS 38, R&D costs should be recognized as an expense when incurred, unless they meet the criteria for recognition as an intangible asset.
The criteria for recognition as an intangible asset are:
It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
The asset can be measured reliably.
Therefore, R76900 costs incurred by the research department should be evaluated to determine if they meet the criteria for recognition as an intangible asset. If the costs do not meet the criteria, they should be recognized as an expense when incurred.
However, if the costs meet the criteria for recognition as an intangible asset, they should be capitalized and measured at cost. The asset should be amortized over its useful life, which is the period over which the asset is expected to generate future economic benefits.
It's important to note that in the case of R&D costs the useful life is difficult to determine and it's important to review the useful life annually and adjust it if necessary. Additionally, if the R&D costs are not expected to generate future economic benefits, they should be written off in the period in which they occur.
It's also important to disclose the nature and amount of R&D costs in the notes to the financial statements, including the accounting policy adopted and any changes in the carrying amount of the intangible asset during the period.