Intangible fixed assets - software development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development expenditure is capitalised only where the directors are satisfied that the project is technically feasible, that the company intends and is able to complete and use or sell the asset, that the asset is expected to generate future economic benefits, and that the expenditure attributable to the asset can be measured reliably.
Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged on a straight-line basis over the asset’s estimated useful economic life of five years, commencing when the asset is available for use.
Where it is not possible to distinguish reliably between the research phase and the development phase of an internal project, the expenditure is treated as incurred in the research phase and recognised as an expense.