International Accounting Standard 38, dealing with intangible assets.
Issued by the International Accounting Standards Board.
IAS 38 requires an entity to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if:
- It is probable that the future economic benefits that are attributable to the asset will flow to the entity; and
- The cost of the asset can be measured reliably.
The criteria for recognising internal development costs as (self-created) assets under IAS 38 include all of:
- The technical feasibility of completing the intangible asset (so that it will be available for use or sale); and
- Intention to complete and use or sell the asset; and
- Ability to use or sell the asset; and
- Existence of a market or, if to be used internally, the usefulness of the asset; and
- Availability of adequate technical, financial, and other resources to complete the asset.
If any of these criteria is not met, then the expenditure is a cost, and not an asset.
Certain defined types of costs - including training costs - must always be charged to expense when they are incurred.
The treatment under IFRS results in a greater proportion of costs being capitalised, compared with US GAAP - under which most research and development costs are expensed, with limited exceptions including certain software expenditure.
- Cost model
- FRS 102
- IAS 16
- Intangible assets
- International Financial Reporting Standards (IFRS)
- Research & development
- Revaluation model
- US GAAP