Blanco Chemical Company spent €15,000,000 in development efforts to create a fertilizer for which it was able to obtain a patent; however, the expected distribution costs make it infeasible to market the chemical in the foreseeable future. According to IAS 38 (Intangible Assets), how should Blanco Chemical Company record the €15,000,000?

Question

Quizplus · Accepted Answer

According to IAS 38, if an intangible asset generated internally, such as a patent, is not expected to generate future economic benefits due to infeasibility of marketing, the expenditure on its development should be recognized as an expense when incurred. Therefore, the €15,000,000 spent on development efforts that cannot be recovered through sales should be recorded as a "Development Expense" on the Income Statement.

Blanco Chemical Company Spent €15,000,000 in Development Efforts to Create