BCZ29 The controversy relating to internally generated intangible assets surrounds whether there should be:

(a) a requirement to recognise internally generated intangible assets in the balance sheet whenever certain criteria are met;

(b) a requirement to recognise expenditure on all internally generated intangible assets as an expense;

(c) a requirement to recognise expenditure on all internally generated intangible assets as an expense, with certain specified exceptions; or

(d) an option to choose between the treatments described in (a) and (b) above.

Background on the requirements for internally generated intangible assets

BCZ30 Before IAS 38 was issued in 1998, some internally generated intangible assets (those that arose from development expenditure) were dealt with under IAS 9 Research and Development Costs. The development of, and revisions to, IAS 9 had always been controversial.

BCZ31 Proposed and approved requirements for the recognition of an asset arising from development expenditure and other internally generated intangible assets had been the following:

(a) in 1978, IASC approved IAS 9 Accounting for Research and Development Activities. It required expenditure on research and development to be recognised as an expense when incurred, except that an enterprise had the option to recognise an asset arising from development expenditure whenever certain criteria were met.