Page 48 - FR Integrated Workbook 2018-19
P. 48

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



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














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