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(1) |
Research and development
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Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss when incurred.
Development activities involve plans or design for the production of new or substantially improved products and processes.
Development expenditure is capitalized only if:
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development costs can be measured reliably;
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the product or process is technically and commercially feasible;
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future economic benefits are probable; and
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the Group intends to and has sufficient resources to complete development and to use or sell the asset.
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With regard to some of the Company’s products, technical feasibility may occur only after the Company receives approval from the U.S. Food and Drug Administration (the FDA). Sometimes the costs incurred between the successful completion of the product’s development and successful trials, and the time the product is ready for sale are immaterial, so that in reality all of the development costs might be recognized in profit or loss, as incurred.
Any capitalized expenditure includes the cost of materials, direct labor and other related costs that are directly attributable to developing the asset for its intended use. Other development expenditures are recognized in profit or loss as incurred.
In subsequent periods, capitalized development expenditure will be measured at cost less accumulated amortization and accumulated impairment losses.
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(2) |
Subsequent expenditure
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Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated brands, is recognized in profit or loss, as incurred.
Amortization is a systematic allocation of the amortizable amount of an intangible asset over its useful life. The amortizable amount is the cost of the asset.
Amortization is recognized in profit or loss, on a straight-line basis over the estimated useful lives of the intangible assets, from the date they are available for use, since these methods most closely reflect the expected pattern of consumption of the future economic benefits embodied in each asset.
Management estimates the useful life of the capitalized development costs as 7 years.
Amortization methods and useful lives are reviewed at each reporting date and adjusted if appropriate.
