The financial accountant recorded the total cost incurred on the self-service system as an
intangible asset at R23 115 800. This includes costs from both the research and development
phases as well as training and kiosk costs.This treatment is not fully compliant with IFRS .
According to IFRS 36 expenditure on an internally generated intangible asset (such as software)
should be divided into research and development phases.
Cost incurred during the Research Phase must be expensed as incurred and cost incurred during
the Development Phase may be capitalised if certain criteria are met.
The Research Phase Cost (R1 318 000) should have been expensed to profit or loss.
Training Costs (R600 000) were not directly attributable to bringing the asset to working condition
and therefore they should be expensed.
The Kiosks (R2 250 000) are physical assets (tangible) and should be recognised under Property
Plant and Equipment (PPE) and not as part of the intangible assets.
The financial accountant incorrectly capitalized all costs including those that should be expensed
(research and training) and misclassified tangible assets (kiosks) as part of the intangible asset. The
correct treatment under IFRS 36 and IAS 16 would involve:
• Expensing R1 318 000 as research expenses
• Expensing R600 000 as training costs
• Capitalizing R21 315 800 (being 21 197 800 + 118 000) as an intangible asset
• Capitalizing R2 250 000 as property plant and equipment
,
intangible asset at R23 115 800. This includes costs from both the research and development
phases as well as training and kiosk costs.This treatment is not fully compliant with IFRS .
According to IFRS 36 expenditure on an internally generated intangible asset (such as software)
should be divided into research and development phases.
Cost incurred during the Research Phase must be expensed as incurred and cost incurred during
the Development Phase may be capitalised if certain criteria are met.
The Research Phase Cost (R1 318 000) should have been expensed to profit or loss.
Training Costs (R600 000) were not directly attributable to bringing the asset to working condition
and therefore they should be expensed.
The Kiosks (R2 250 000) are physical assets (tangible) and should be recognised under Property
Plant and Equipment (PPE) and not as part of the intangible assets.
The financial accountant incorrectly capitalized all costs including those that should be expensed
(research and training) and misclassified tangible assets (kiosks) as part of the intangible asset. The
correct treatment under IFRS 36 and IAS 16 would involve:
• Expensing R1 318 000 as research expenses
• Expensing R600 000 as training costs
• Capitalizing R21 315 800 (being 21 197 800 + 118 000) as an intangible asset
• Capitalizing R2 250 000 as property plant and equipment
,
