Show all the costs that would be classified as costs incurred during the research phase in terms of IAS 38 – Intangible assets. Provide a brief reason as to why these costs would be classified as such.
Curios Creatives Ltd (CC) is a company specialising in UI and UX design. In the financial year ended
30 June 2021, the CC commenced development of a running application that can be fully
integrated on all types of smartphones, smart watches, and smart gear.
The following expenditures were incurred in respect of the running application in the current
financial period:
Testing of designs R350 000
Developer Salaries * R400 000
General
Legal costs associated with the sale of the application** R 70 000
Technical feasibility testing *** R 85 000
Training of Staff to manage application R35 000
*Developer salaries are the salaries paid to the software developers during the design stage of the
application.
** Legal costs include VAT
*** Technical feasibility testing costs include the staff members that came in on the weekend
while the directors did a trial run to test the calibration of the app.
After the weekend trial run, the board of directors have assessed that the technology contained in
the application will result in it having an indefinite useful life.
Required:
Q.3.1 Show all the costs that would be classified as costs incurred during the research
phase in terms of IAS 38 – Intangible assets. Provide a brief reason as to why
these costs would be classified as such.
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