US CMA Part 1 · Chapter 1 · Question 11 of 23
A pharmaceutical company incurs costs in the development phase of a new product after it has demonstrated technical feasibility, intention to complete and the ability to generate future economic benefits. How are these costs treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Capitalized as an intangible asset under IFRS, but generally expensed as incurred under US GAAP
Explanation
IAS 38 requires development costs to be capitalized once the specified recognition criteria are met; research costs are always expensed. US GAAP generally requires research and development costs to be expensed as incurred, with limited exceptions such as certain software development costs.
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