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Reporting R&D Activities in Accordance with IFRS

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Innovation performance accounting

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Abstract

1IFRS/IAS1 do not contain any specific regulations for the accounting treatment of R&D activities. Instead, the general regulations relating to reporting intangible assets are to be applied in this case.

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Notes

  1. 1.

    The following comments do not take the treatment of patents in accordance with the German Commercial Code (HGB) and US GAAP into consideration; refer in this connection to, for example, Esser/Hackenberger, Bilanzierung immaterieller Vermögenswerte des Anlagevermögens nach IFRS und US-GAAP (Valuation of Intangible Assets under Fixed Assets in Accordance with IFRS and US GAAP), in: KoR 2004, 402–414.

  2. 2.

    For further standards which regulate the valuation of intangible assets in special cases, see IAS 38.2–7 and Heyd/Lutz-Ingold, Immaterieller Vermögenswerte und Goodwill nach IFRS (Intangible Assets and Goodwill in Accordance with IFRS), Munich 2005, 29–30.

  3. 3.

    For details, refer, for example, to Ruhnke, Rechnungslegung nach IFRS und HGB (Accounting in Accordance with IFRS and HGB), Stuttgart 2005, 260 ff., Kirsch, Einführung in die Internationale Rechnungslegung (Introduction to International Accounting in Accordance with IAS/IFRS), Herne/Berlin 2003, 30 ff.

  4. 4.

    Cf. e.g. Heyd/Lutz-Ingold (fn 2), Esser/Hackenberger (fn 1).

  5. 5.

    IAS 38.44–47 also include cases of acquisition through a government grant and the exchange of assets. These two cases will not be expanded upon in the following remarks.

  6. 6.

    On this and other details, cf. Heyd/Lutz-Ingold (fn 2), 35

  7. 7.

    For an in-depth treatment of this issue, see Heyd/Lutz-Ingold (fn 2), 1–7

  8. 8.

    On this subject, see e.g. Heyd/Lutz-Ingold (fn 2), 48 f., Esser/Hackenberger (fn 1), 402 ff., 404 f.

  9. 9.

    On this subject, see e.g. Heyd/Lutz-Ingold (fn 2), 48 f.,

  10. 10.

    On this subject, see also e.g. IASB Framework 1989, F. 53 ff.

  11. 11.

    On the redundancy of this criterion, cf. Heyd/Lutz-Ingold (fn 2), 28

  12. 12.

    On this subject, cf. Heyd/Lutz-Ingold (fn 2), 40

  13. 13.

    Heyd/Lutz-Ingold (fn 2), 41, regard this as an “avoidable redundancy”.

  14. 14.

    Fn 2, 46

  15. 15.

    With regard to the financial accounting of R&D activities in various industries, see Leibfried/Pfanzelt, Praxis der Bilanzierung von Forschungs- und Entwicklungskosten gemäss IAS/IFRS, in: KoR 2004, 491–497 (Financial Accounting for Research and Development Costs in Accordance with IAS/IFRS)

  16. 16.

    Further details on business combinations and their treatment in accordance with IFRS 3 can be found, for example, in Heyd/Lutz-Ingold (fn 2) 131 ff., Küting/Wirth, Bilanzierung von Unternehmenszusammenschlüssen nach IFRS 3 (Financial Accounting of Business Combinations in Accordance with IFRS 3), in: KoR 2004, 167–177, Brücks/Wiederhold, IFRS Business Combinations, in KoR 2004, 177–185, Zeiger, Purchase Price Allocation in Accordance with IFRS and US GAAP, in Ballwieser/Beyer/Zeige (eds.), Unternehmenskauf nach IFRS und US GAAP (Business Purchase in Accordance with IFRS and US-GAAP), Stuttgart 2005, 141 ff.

  17. 17.

    On this subject see IFRS 3.2–13.

  18. 18.

    In accordance with IFRS 3, Appendix A, this is “the date on which the acquirer effectively obtains control of the acquiree”.

  19. 19.

    Cf. Heyd/Lutz-Ingold (fn 2), 139 and HFA 16 Sub-section 41.

  20. 20.

    Details on the calculation of acquisition costs of a business combination are given in IFRS 3.24–35.

  21. 21.

    If the acquirer does not take over the acquiree completely, but only partially, the proportionate amount of the net assets must be taken as the basis.

  22. 22.

    Further details on this are to be found in IAS 38.36–38.

  23. 23.

    See also IFRS 3.45

  24. 24.

    Cf. IFRS 3.45 and IAS 38.34. For the treatment of IP R&D refer above all to Lüdenbach/Prusacyk, Bilanzierung von “In-Process Research and Development” beim Unternehmenserwerb nach IFRS und US-GAAP (In-Process Research and Development Accounting for Business Acquisitions in Accordance with IFRS and US-GAAP) in: KoR 2004, 415–422, AICPA, Practice Aid Series: Assets Acquired in a Business Combination to be Used in Research and Development Activities: A Focus on Software, Electronic Devices, and Pharmaceutical Industries, 2001, and Heyd/Lutz-Ingold, (fn 2) 53.

  25. 25.

    IAS 38.42 f. The same practice applies to separately acquired research and development projects.

  26. 26.

    Cf. Heyd/Lutz-Ingold (fn 2), 46.

  27. 27.

    On this differentiation, cf. also IAS 38.18–71 on the one hand, and IAS 38.72–111 on the other.

  28. 28.

    Cf. Heyd/Lutz-Ingold (fn 2), 63 f.

  29. 29.

    Cf. IFRS 3.24–35 for the calculation of acquisition costs of a business combination.

  30. 30.

    Refer also to Heyd/Lutz-Ingold, 54, who emphasise that no individual acquisition costs are available.

  31. 31.

    IDW comment on financial accounting (IDW RS HFA 16), in: FN 2005, 721–738, Sub-section 7.

  32. 32.

    Ibidem.

  33. 33.

    IAS 38.8 defines the existence of an active market when items traded are homogeneous, willing buyers and sellers can normally be found at any time, and prices are available to the public.

  34. 34.

    For details on the measurement of intangible assets – also in the case of business combinations – refer in particular to Moser/Goddar, Grundlagen der Bewertung immaterieller Vermögenswerte am Beispiel der Bewertung patentgeschützter Technologien (Fundamental Principles in the Valuation of Intangible Assets, Taking the Valuation of Technologies Protected by Patents as an Example), in: FB 2007, 594–609, and IDW RS HFA 16 (Fn 31), sub-sections 19–60).

  35. 35.

    See fn 32 for the definition of the expression “active market” in accordance with IAS 38.8

  36. 36.

    In the German translation of IAS 38 (revised 2004), in addition to terminological inexactitudes, it was obviously not noticed that the term “Warenzeichen” (trade marks) in the German Trade Mark Act has been replaced by the term “Marken” (brands)

  37. 37.

    IAS 38.78 does, however, also cite examples of cases in which there is an active market: transferable taxi licences, fishing licences, production quotas

  38. 38.

    Examples of separate classes are to be found in IAS 38.119, such as “computer software” or “copyrights, patents and other industrial property rights, service and operating rights”.

  39. 39.

    Fn 2, 78 f.

  40. 40.

    Refer in this case also to the example quoted in Heyd/Lutz-Ingold (fn 2), 81 f.

  41. 41.

    The German translation of IAS 38.88 ff. uses the expression “unbegrenzt” (unlimited)

  42. 42.

    IAS 38.8 correspondingly defines amortisation as “the systematic allocation of the depreciable amount of an intangible asset over its useful life.”

  43. 43.

    For the determination of residual value, cf. IAS 38.102.

  44. 44.

    For details of the review of impairments see Section 6.4.3.4.

  45. 45.

    For details of the review of impairments see Section 6.4.3.4.

  46. 46.

    Cf. also Graumann, Die Durchführung des Wertminderungstests auf zahlungsmittelgenerierende Einheiten nach IAS 36 (The Implementation of Impairment Tests in Cash-Generating Units in Accordance with IAS 36), in: UM 2004, 370 ff., 373

  47. 47.

    Cf. section “Intangible Assets with Indefinite Useful Lives”.

  48. 48.

    Heyd/Lutz-Ingold (fn 2), 94 f., assume that the conditions for these exceptional circumstances will in practice only rarely be met.

  49. 49.

    See Heyd/Lutz-Ingold (fn 2), 90 for the assumption of the rational dealing involved in this.

  50. 50.

    Similarly Appendix A1 to IAS 36

  51. 51.

    Cf. also IAS 38.8

  52. 52.

    On this subject, see e.g. Moser/Goddar (fn 34), esp. 597 f.

  53. 53.

    Cf. Heyd/Lutz-Ingold (fn 2), 102

  54. 54.

    Similarly IAS 36.130 (d)

  55. 55.

    For a review of corporate assets for impairment see IAS 36.101.

  56. 56.

    Further details, particularly on the allocation of goodwill to cash-generating units or on the treatment of minority interests, are set out in IAS 36.80–99. Refer also to Heyd/Lutz-Ingold (fn 2), 172–176, Hachmeister, Impairment Test in Accordance with IFRS and US GAAP, in: Ballwieser/Beyer/Zelger (fn 16), 191 ff., 202–207.

  57. 57.

    It has to be pointed out that in accordance with IAS 36.117, the carrying amount after reversal of an impairment loss “may not exceed the carrying amount which would have been determined (net of amortisation and depreciation) if in prior years no impairment loss had been recognised”.

  58. 58.

    If such evidence exists, this is an indication that, in accordance with IAS 36.113, the remaining useful life, the depreciation/amortisation method and the residual value may need to be reviewed, irrespective of an impairment loss being reversed.

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  1. University of Applied Sciences, Erfurt, Germany

    Ulrich Moser

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Editors and Affiliations

  1. FB 3 Wirtschaftswissenschaften, Stg. Betriebswirtschaft, FH für Technik und Wirtschaft, Treskowallee 8, Berlin, 10318, Berlin, Germany

    Wilhelm Schmeisser

  2. Rolls-Royce Deutschland Ltd. & Co. KG, Eschenweg 11, Dahlewitz, 15827, Germany

    Hermann Mohnkopf

  3. FB 3 Wirtschaftswissenschaften, Stg. Betriebswirtschaft, FH für Technik und Wirtschaft, Treskowallee 8, Berlin, 10318, Berlin, Germany

    Matthias Hartmann

  4. FH München, Lothstr. 64, München, 80335, Germany

    Gerhard Metze

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Moser, U. (2010). Reporting R&D Activities in Accordance with IFRS. In: Schmeisser, W., Mohnkopf, H., Hartmann, M., Metze, G. (eds) Innovation performance accounting. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-01353-9_6

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