Research and development costs
Expenditure on research activities is recognised within profit or loss as an expense is incurred.
Development costs are capitalised only where they can be identified with a specific product or project that will generate probable future economic benefits, the costs can be reliably measured and all the criteria under FRS 102 are met. They are amortised on a straight line basis to profit or loss over their estimated useful life. All other development costs are expenses as incurred.
Capitalised development costs are reviewed annually, and where future benefits are deemed to have ceased or to be in doubt, the balance is written off to profit or loss.
Capitalised development costs are not treated as a realised loss for the purpose of determining the company’s distributable profits as the costs meet the conditions permitting them to be treated as an asset under FRS 102.
Purchased intangible assets
Purchased intangible assets are initially recognised at cost. After recognition, intangible assets are measured at cost less any accumulated amortization and impairment losses.
All intangible assets are considered to have a finite useful life. The estimated useful lives are as follows:
Development expenditure – 5 years
At each reporting date the company assesses whether there is any indication of impairment. If such indications exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use.
Any impairment loss is recognised immediately as an expense within profit or loss.