One of the criteria for capitalising development costs under IAS 38 is, as we all know, 'the ability to reliably measure the expenditure attributable to the intangible asset during its development'. As a company that doesn't want to capitalise R&D at this stage in our life, are we able avoid having to simply by not implementing a timekeeping system for engineers? Or is there an expectation that we attempt to measure this reliably and let auditors be the judge of our success?
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Reliable measurement of cost isn't the only criterion for recognition of an intangible asset. It must also be probable that the future economic benefits that are attributable to the asset will flow to the entity.
That second criterion is probably the easier one to argue if you don't want to capitalise R&D costs. I would probably prefer to have some sort of time recording for management purposes rather than not having one to justify a particular accounting treatment.
If you're that bothered, you might want to check the standard yourself. The full text of IFRS and IAS can be downloaded for free from ifrs.org, subject to registration. They're a little hard to find now - search for eifrs.
Paul gave you a pretty straight foward way out of capitalising R&D.
Few auditors will challenge it. I know we don't, because we're not experts. Put simply, if the client says 'it's this', we can't really challenge because they're the experts and we're not.
And his suggestion re: IFRS is pretty reasonable.
Most of the regulars on here deal with small companies, sole traders and the like. I find I'm one of the few with medium and large entity clients, none of which are under IFRS either. We're all FRS102 and FRS105 mainly.
If you're under IFRS, you should have access to an auditor who can help you better than we can; unless you're opinion shopping.
In your original post you asked ".. are we able (to) avoid .." in what appeared to be the context of an accounting standard.
Now you're using phrases like "is it permissible" and "it seems wrong" and "it feels like we should have an obligation" ... all of which seem to relate to moral judgements rather than accounting (or legal) rules.
Hence, speaking for myself, why there is a disjunct between you & responders.
David
I'm sorry you didn't like my responses. Sometimes answers may not be to the exact question asked. Nevertheless, answers along the lines of "have you thought of this?" or even "have you misunderstood?" can be helpful.
Many people are unaware that accounting standards (and VAT guides, HMRC manuals) are freely available online.
When questions are posted, we can only go on the information in the OP. You may already have determined that there will be future economic benefits from your R&D spend. But that wasn't spelt out - hence the "have you considered?" response.
The question asked is very narrow. Accounting standards generally seek to prevent costs going to the balance sheet unless there is a strong justification. You are wanting to do the opposite. The IAS 38 criteria for capitalising R&D costs says you can only capitalise if you meet certain tests. It doesn't say you must meet those tests and therefore capitalise. (That's the "have you misunderstood?")