1. Core Definition and Recognition Criteria
An intangible asset is an identifiable non-monetary asset without physical substance. It must meet three criteria: identifiability (separable from the entity or arising from contractual/legal rights), control over the resource, and the presence of future economic benefits.
 
2. Research and Development (R&D) Accounting Framework Split
The accounting treatment for internally generated intangible assets represents a major divergence between international and US standards:
┌───────────────────────────┬───────────────────────────┬──────────────────────┐
│ Phase / Project Stage     │ IFRS Treatment (IAS 38)   │ US GAAP (ASC 730)    │
├───────────────────────────┼───────────────────────────┼──────────────────────┤
│ Research Phase            │ Expense immediately       │ Expense immediately  │
│ Development Phase         │ Capitalize if ALL 6       │ Expense immediately  │
│                           │ criteria are met          │                      │
└───────────────────────────┴───────────────────────────┴──────────────────────┘

3. The 6 Technical IFRS Criteria for Development Capitalization
Under IAS 38, an internal development project’s costs can be capitalized only if the entity can demonstrate all of the following:
  • The technical feasibility of completing the intangible asset so that it will be available for use or sale.
  • Its intention to complete the intangible asset and use or sell it.
  • Its ability to use or sell the intangible asset.
  • How the intangible asset will generate probable future economic benefits.
  • The availability of adequate technical, financial, and other resources to complete the development.
  • Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Under US GAAP (ASC 730), all research and development costs must be expensed as incurred. The only exceptions are specialized software development costs under ASC 985 (for software to be sold) or ASC 350-40 (for internal-use software), which can be capitalized after technical feasibility or management commitment has been established.
 
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