Expenditures or Capitalization of Intangibles

Expenditures or Capitalization of Intangibles, R&D, Licenses, Goodwill, Advertising and Software Development
Cost of intangibles
Cost of intangibles purchased from a third party may be capitalized, while the cost of intangibles developed internally or government grants must be expensed (capitalize only the cost of production)

Research & Development
In US, research & development must be expensed;

Outside US, some development costs may be capitalized if various conditions are met.

In Canada, capitalize if product process, cost, market are clearly defined & technical feasibility established & firm has sufficient resources to complete the process & will produce the product ;
In UK, similar to Canada but most co expensed the cost.

Franchise/license costs
may be capitalized and expensed over the period of contract.

Goodwill
The diff between acquired value and fair market value. Generated in the purchase method acquisition is capitalized. US GAAP does not permit amortization of this goodwill unless aforesaid purchase method acquisition, while IASB GAAP does.

Advertising costs
Generally expensed, except the cost of the direct response advertising program , which may be capitalized if ad directly to produce future benefit

Software development costs
must be expensed if the software has not yet reached the point of economic feasibility. After this point, further costs may be capitalized.

Notes:
· Don’t confuse capitalization of expense with capitalization of leases.