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(ifrs And Us Gaap, 2005) ifrs Procedures Call For Expensing Of All Research ...

(IFRS and US GAAP, 2005)

IFRS procedures call for expensing of all research cost. Assessment of development costs for the purpose of valuation for long-term benefits is now essential for their amortisation over their determined benefit period. Capitalisation of development costs is allowed only when development efforts result in the creation of an identifiable asset, e.g. software or processes, whose beneficial life and costs can be measured reliably. If however a Research and Development project is purchased, IFRS provides for the treatment of the whole amount as an asset, even though part of the cost reflects research expenses. In the case of further costs being incurred on the project after its purchase, research costs will need to be expensed out while development costs will be eligible for capitalisation, subject to their meeting the required criteria.

US GAAP however stipulates that all Research and Development costs be immediately charged to expenses. Certain development costs pertaining to website and software development are however allowed to be capitalised. Research and Development assets, if acquired are valued at fair value under the purchase method. However if the assets do not have any alternate use they are immediately charged to expense.

3. Conclusion

Both methods of accounting, US GAAP and IFRS, while they have taken different routes, and have changed their accounting standards at different times, have now arrived at similar positions in the treatment of a number of items, including valuation and treatment of goodwill. The differences that exist today in this area are primarily in the area of detailing, methods of computation and in the treatment of individual components of the accounting requirements, like for example, in the computation of impairment of goodwill. Both PWC and publications opine that US GAAP will most probably move further towards the IFRS position intangible assets as part of the ongoing convergence exercise.

Bibliography

Bullen, H, and Cafini, R, 2006, Accounting Standards Regarding Intellectual Assets, UN Department of Economic and Social Affairs, Retrieved April 16, 2007 from unstats.un.org/unsd/nationalaccount/ia10.pdf
FASB: Financial Accounting Standard Board, 2006, Retrieved April 16, 2007 from www.fasb.org
IFRS and US GAAP, 2005, IAS Plus , Retrieved April, 2007 from .net/dtt/cda/doc/content/dtt_audit_iasplusgl_073106.pdf
Higson, C and Sproul, M, 2005, Coping with IFRS, London Business School, Retrieved April 16, 2007 from www.london.edu/assets/documents/PDF/Chris_Higson_paper_IFRS.pdf -
Intangible assets: brand valuation, 2004, IFRS News Brand Valuation, Retrieved April 16, 2007 from www.pwc.com/gx/eng/about/svcs/corporatereporting/IFRSNewsCatalogue.pdf
Lycklama, M.P., 2005, Goodwill and value creation of acquisitions, Retrieved April 16, 2007 from www.

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