During its first year of operation, Dovery Company incurred $375,000 of research costs undertaken with the prospect of gaining new technical understanding about a new nanotechnology procedure. An additional $505,000 was incurred to develop a production process to use that new technology to produce a new lubricant product. Assume development costs meet six conditions such as technical feasibility to demonstrate future economic benefit. Under IFRS, which of the following is the appropriate accounting for these costs?
A) capitalize $880,000 as an intangible asset
B) expense $375,000 and capitalize $505,000 as an intangible asset
C) expense $505,000 and capitalize $375,000 as an intangible asset
D) Any of these options can be appropriate under IFRS.

Question

Quizplus · Accepted Answer

Under IFRS, research costs are expensed as incurred, while development costs can be capitalized if certain criteria are met. Since the development costs meet the criteria, they can be capitalized.

During Its First Year of Operation, Dovery Company Incurred $375,000