IAS 38

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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:

  1. The technical feasibility of completing the intangible asset (so that it will be available for use or sale); and
  2. Intention to complete and use or sell the asset; and
  3. Ability to use or sell the asset; and
  4. Existence of a market or, if to be used internally, the usefulness of the asset; and
  5. 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.

See also

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