IAS 9 is an international accounting standard issued by the International Accounting Standards Board (IASB) that provides guidance on the accounting treatment of research and development activities.
The standard defines research as original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is defined as the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the start of commercial production or use.
The standard requires that research costs be expensed as incurred, while development costs be capitalized if certain criteria are met. To be eligible for capitalization, the standard requires that the company can demonstrate the technical feasibility of the project, its intention to complete the project, the ability to use or sell the project, and the availability of adequate resources to complete the project.
The capitalized costs are then amortized over the estimated useful life of the asset created through the development process. Any impairment losses should be recognized when there is a decline in the recoverable amount of the asset.
IAS 9 also requires disclosures about the company’s research and development activities, including the amount of expenditure incurred, the nature of the projects, and any significant uncertainties that may affect future cash flows.