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Chapter 3

Research and development

3.1 Definitions

Research is original and planned investigation to gain new scientific
knowledge or understanding.
Development is the application of knowledge to create some new or
improved material, product, service, process or device.

3.2 Accounting treatment

Research expenditure is written off as incurred to the statement of profit or loss.

Development expenditure is capitalised only once all the recognition criteria are
satisfied.

3.3 Recognition criteria

 Probable flow of economic benefit

 Intention to complete the project

 Reliable measurement of development cost

 Adequate resources available to complete the project

 Technically feasible

 Expected to be profitable

Illustrations and further practice

Now try TYU questions 1 and 2 from Chapter 3 of the Study Text.

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