RESEARCH AND DEVELOPMENT EXPENSES – INCOPORAL FIXED ASSETS TREATMENT IN UEMOA AREA

RESEARCH AND DEVELOPMENT EXPENSES – INCOPORAL FIXED ASSETS TREATMENT IN UEMOA AREA

Research and development expenses

SECTION 1: Definition of activities related to research and development

An internally generated intangible asset is likely to be registered in the asset if:

  • It meets the definition of an asset and in particular that this asset is identifiable
  • The research phase of the development phase can be distinguished. Otherwise, the entire cost is put into charge.

Research is defined as an original and programmed investigation carried out by an entity with a view to acquiring new scientific or technical understanding and knowledge. One distinguishes:

  • Activities to gain new knowledge
    • The search for the application of research results or other knowledge as well as their assessment and the choice chosen in fine
    • The search for other materials, devices, process products, systems or services
    • The formulation, design, evaluation and final selection of other possibilities for new or improved materials, devices, products, processes, systems or services.

Expenditure incurred for research or in an in-house research project must be recorded in charge of the year in which they are incurred. However, if these expenses are incurred as part of a grouping of entities, they are recorded as intangible assets.

Development is the application of research results or other knowledge to a plan or model for the production of new or substantially improved materials, devices, products, processes, systems or services, before Start of their commercial production or use. One distinguishes:

  • Design, construction and testing of Preproduction or pre-use models and prototypes
    • Design of tools, templates, moulds and dies involving new technology
    • Design, construction and operation of a pilot unit that is not on a scale permitting commercial production under economic conditions
    • Design, construction and testing for the chosen solution for other new or improved materials, devices, products, processes, systems or services.

SECTION 2: Accounting for development expenses

To account for development expenses As a capital asset Entity must complete the
The following conditions at the same time:

  • The technical feasibility required for the completion of the intangible asset for commissioning or sale
    • Its intention to complete the intangible asset and to 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 technical, financial and other resources appropriate to complete the development and use or sell the intangible asset
    • Its ability to reliably assess expenditures attributable to the intangible asset during its development.
    Failing that, consider these expenses as charges.

This diagram below summarizes the procedure for accounting treatment of development costs.

Development costs are accounted for by debiting the 211_frais Development Account and crediting the fixed 721_production account, intangible assets.

Subsequent expenditure on a research and development project must be accounted for in accordance with the same principles as for internally generated research and development projects.

With regard to the depreciation of fixed development costs, it must be spread over the lifetime of the asset under consideration. It is recorded at the debit of the 6812_Dotations account for depreciation of Immo And by the credit of the 2811_Amortissement account of development costs.

SECTION 3: Evaluation of development expenditure

The cost of development is measured from the date on which this intangible asset satisfies the recognition criteria for the first time. However, the Expenses recorded in charge before the activation data can no longer be activated.

Development costs include all expenditures directly attributable to the development of this Immo Intangible asset. These are the costs necessary for the creation, production and preparation of the fixed asset. One distinguishes:

  • The costs of materials and services used or consumed to generate the intangible asset
    • The costs of staff benefits resulting from the creation of the intangible asset
    • Fees for the registration of a legal right, such as a patent
    • Testing the operation of the asset
    • Depreciation of patents and licenses used to generate the intangible asset
    • Borrowing costs as long as they meet the criteria for the activation of borrowing costs, to be included in the costs of an internally generated intangible asset.

However, launch costs (advertisements), administrative costs and overhead costs, clearly identified inefficiencies, and initial operational losses, staff training expenses for use of assets are to be excluded from Directly attributable costs.

SECTION 4: Research and development expenditures carried out in the framework of third party orders

The R&D costs relate to the expenses incurred by the entity in this area for its own account. Therefore, any other costs entering the cost of production of orders placed by third parties are to be registered in charge.

SECTION 5 : Décomptabilisation or out of development costs

An intangible asset must be décomptabilisé When it is released or when the entity no longer expects future economic benefits from its use or exit.

In the event of a failure of the R&D project or where the conditions for the activation of the expenditure are not met, the previously immobilized development costs are immediately released from the assets. In fact, the 2811_Amortissement account of the development costs and the 81_Valeur account of the capital disposals for the fraction of the development costs not yet amortized are charged. And we’re crediting the 211_Frais Development Account.

Also when the R&D costs are used to create a tangible property (prototype), they are registered to the capital or inventory account and not to the account 211 development costs.

SECTION 6: INFORMATION to be provided

At the balance sheet level, the normal system has a position of Immo Intangible to indicate the amount of the R&D fee.
It is also appropriate to provide in the notes annexes the necessary information if they are significant.
The management reports provided by the capital companies necessarily provide the R&D activities and forecasts.

Patents, licenses, trademarks, software, INTERNET SITES and similar rights

SECTION 1: Patents, LICENCES and similar rights

  • The patent is a title giving the inventor of a product or process capable of industrial applications, or its assignee, an operating monopoly for a certain period of time. A patent can either be acquired or generated internally. When acquired, it is recorded at the cost of acquisition at the 221_Brevets account.

In the event that it is generated internally, the fees for the creation of patents are immobilized when they meet the requirements to be accounted for in development costs.

Where the patent is taken as a result of research related to the realization of projects, the 2121_Brevets account shall be debited from the amount corresponding to the costs incurred during the development period including the costs of filing the patent, by the credit of 211_Frais Development Account.

Patents are depreciable over the term of protection they enjoy or their effective duration of use.

  • The operating licence is an act whereby the owner of a trade mark gives a third party the opportunity to sell one or more of its products for a fee. They are to be counted as capital assets at the cost of acquisition at the debit of the 2122_Licences account.

However, where it is acquired by means of annual royalties consisting of a fixed part and a variable part, the accounting of the fixed part shall be recorded in the assets of the balance sheet in consideration of the inclusion of the debt liabilities. And the variable part will be counted in charge on each of the Exercises. The amortization Of the licence must be calculated on the probable duration of use that cannot exceed the duration of the authorization at the end of which the residual value will be null.

  • Public exclusive rights are exclusive rights for remuneration or free of charge granted by an administrative authority (licences, import quotas, landing rights on an airport…). Exclusive rights for consideration are recorded at their acquisition cost if they are acquired for a period of more than 12 months. On the other hand, those acquired free of charge are counted at their present value (which is rarely possible). Therefore, as a precautionary principle, the SYSCOHADA considers them to be of zero value. Depreciation must be calculated on the useful life which must not exceed the contractual term.

SECTION 2: Software

Software is legally protected intangible rights. It should be distinguished:

  • Hardware-inseparable software: In the example of operating systems and other integrated software, they are recorded as tangible capital assets with the equipment to which they are attached.
  • Software that is part of a development project: These softwares therefore follow the accounting treatment of the projects to which they relate. The costs incurred during the research phase are counted in charge and those incurred during the development phase are activated.
  • Standalone softwareS: For this case, one distinguishes:

Expenditure in view of improving software can be either immobilized or recognised as an expense.

SECTION 3 : Sites internet

Depending on the acquisition process, there

  • Internet sites acquired “turnkey” : That must be counted as capital asset at their cost of acquisition by the debit of the Internet 2132_Sites account. However, if the buy-out is very low, they can be carried in charge. It must be amortized according to the linear mode over its probable duration of use.
  • Websites created by the entity : These are advertising sites and e-commerce and related sites:

The design and development of e-commerce sites include 3 phases:

  • Pre-research Phase : The costs incurred in this phase are to be put in charge, as there is not yet any visibility on the future economic benefits.
  • Development and Production Phase : The costs incurred throughout this phase are recorded in the assets at the rate of the Internet 2132_Sites account.
  • Operating Phase : Expenses subsequently incurred after the acquisition or completion of the site are to be counted as charges, unless there is a likelihood that these expenses will allow the site to generate future economic benefits and also that such expenses can be Valued and attributed to the asset in a reliable manner.

SECTION 4: Marks

One distinguishes:

  • The brands acquired : are recorded as capital and depreciable if the useful life is determinable. As a result, trademarks with legal protection are generally non-depreciable.
  • Brands created internally : The expenses incurred for the creation of this mark are recognised in charge.

SECTION 5: Right to lease and no-door

The right to the lease is for the tenant who pays it an intangible asset, which must be amortized over the term of the lease.
The door step is a rent supplement distributed over the term of the lease and is therefore a charge to be counted in the rental account. At the end of the year, the rent supplement for the following years is returned by the CCA account.

SECTION 6: Customer files records newspaper titles, and magazines

  • When acquired, they are recorded as capital assets, and amortized over the useful life of the file, notices, newspapers or magazines. However, if the clients of the list are supposed to remain acquired to the entity (leader position, niche…), no depreciation.
  • when generated internally; They are counted in charge, due to the inability to distinguish those committed to develop the activity of the entity as a whole.

SECTION 7: Commercial funds

It is a set of means (tangible and incorporeal), allowing a trader to attract and retain a clientele. The elements of the Background are accounted for by their nature and the residual item not assigned to a specific account is recorded at the debit of the Commercial Fund account. If it is created by the entity, it is registered in support.

It is in principle non-depreciable, because it has an unlimited life span. If its useful life is limited, it is depreciable. In exceptional cases where the duration is limited, but cannot be reliably estimated, it is amortized over 10yrs.
However, it must undergo impairment tests at every indication of a value loss index.

SECTION 8: Cost of obtaining the contract

These costs are activated if the following conditions are met:

 

 

 

INTEGRATION OF COGELEC ENERGY SAS IN THE PORTFOLIO OF OUR OFFICE !!! Back to the pictures of the official launch of IFAGE's Professional Master Program in Control and Audit Accounting (CCA) on Wednesday, July 25, 2018.