Expenditure on research activities is recognised within profit or loss as an expense is incurred.
Development costs are capitalised only where they can be identified with a specific product or project that will generate probable future economic benefits, the costs can be reliably measured and all the criteria under FRS 102 are met. They are amortised on a straight line basis to profit or loss over their estimated useful life. Amortisation begins when the intangible asset is available for use. All other development costs are expenses as incurred.
Intangibles and Research and Development
Capitalised development costs are reviewed annually, and where future benefits are deemed to have ceased or to be in doubt, the balance is written off to profit or loss.
Capitalised development costs are not treated as a realised loss for the purpose of determining the company’s distributable profits as the costs meet the conditions permitting them to be treated as an asset under FRS 102.
All intangible assets are considered to have a finite useful life. The estimated useful lives are as follows:
Software development – 3 to 4 years on a straight line basis
At each reporting date the company assesses whether there is any indication of impairment. If such indications exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. Any impairment loss is recognised immediately as an expense within profit or loss.