Can we capitalise the development cost according to the accounting standards in UK?
Construction in progress can always be capitalised as such and released to COGS when the units are completed and sold. The question of capitalising development only arises in the case of research and development. The rules under IAS 38 – Initial Recognition: Research and Development Costs Charge all research cost to expense. [IAS 38.54] Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. This means that the enterprise must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. [IAS 38.57] If an enterprise cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the enterprise treats the expenditure for that project as if it were incurred in the research phase only.
