7.6 Expenditure on research costs should be recognized as an expense when it is incurred ( . . . ) An intangible asset arising from development should be recognized if, and only if, an enterprise can demonstrate all of the following . . . (IAS 38 – Intangible Assets)

(a) Explain why expenditure on research is treated differently from expenditure on development.

(b) State the criteria to be demonstrated for expenditure on development to be recognised as an intangible asset.

(c) An enterprise has incurred the following costs prior to commercial production of a new pollution filter for use on commercial vehicles:

Marketing awareness campaign EUR 50,000 Patent royalty payable to inventor of filter EUR 12,000 Salaries of staff testing filter prototypes EUR 38,500 Which costs should be included in the internally generated intangible asset?

(d) Describe how and when development expenditure should be amortised.