Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
| a) | the technical feasibility of completing the intangible asset so that it will be available for use or sale. |
| b) | its intention to complete the intangible asset and use or sell it. |
| c) | its ability to use or sell the intangible asset. |
| d) | how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset. |
| e) | the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. |
| f) | its ability to measure reliably the expenditure attributable to the intangible asset during its development. |
For the industry in which the Group operates, the life science industry, criteria a) and d) tend to be the most difficult to achieve. Experience shows that in the Biotechnology sector technical feasibility of completing the project is met when such project completes successfully Phase III of its development. For medical devices this is usually met at the moment of CE marking.
Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.
Amortisation of the asset begins when development has been completed and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in Research & Development expenses. During the period of development, the asset is tested for impairment annually, or earlier when an impairment indicator occurs. As of balance sheet date, only the development costs of C-Cathez have been capitalized and amortized over a period of 17 years which corresponds to the period over which the intellectual property is protected.