IAS 9
Withdrawn
Accounting for Research and Development Activities
Established the foundational distinction between research costs (always expensed) and development costs (capitalised if specific criteria are met). Withdrawn in 1998, absorbed into IAS 38 Intangible Assets.
Withdrawn Standard
IAS 9 (issued 1978, revised 1993) established the foundational distinction between research costs (always expensed) and development costs (capitalised if specific criteria are met). It was formally superseded by IAS 38 Intangible Assets in 1998, which absorbed and refined its core R&D capitalisation criteria within a far broader intangible assets framework.
It is retained here for historical reference and because its research/development split and six capitalisation criteria survive essentially unchanged as the core of IAS 38's treatment of internally generated intangible assets today. For current R&D accounting, always apply IAS 38.
Current Standard
IAS 38 Intangible Assets 1
Conceptual Framework Linkage
Distinguishing genuine future benefit from speculative investigation
The Conceptual Framework's asset recognition criteria require a probable future economic benefit that can be measured reliably. IAS 9 was the IASC's first attempt to apply this specifically to R&D spending – recognising that pure research (investigation without yet knowing if anything commercially useful will result) does not meet these criteria, while development (applying research findings to a specific, technically/commercially viable plan) potentially does, once sufficiently advanced.
HOW IAS 9 MAPPED TO THE FRAMEWORK
Probable future economic benefit – research is inherently speculative (the entity often doesn't yet know if useful output will emerge), while development follows an identified technical/commercial path with a clearer prospect of future benefit Reliable measurement – development costs, once specific criteria are met, can be reliably measured and attributed to a probable future product/process Prudence – the default position (expense unless proven otherwise) reflected an appropriately cautious approach to a highly uncertain area of spending
IAS 9's research/development split, and its underlying philosophy (expense unless specific reliability/probability criteria are met), survives essentially unchanged as the core of IAS 38's treatment of internally generated intangible assets today.
The two-stage classification, at a glance
StageTreatment
ResearchAlways expensed as incurred
DevelopmentCapitalised only if specific criteria are met
This binary split, with development capitalisation as the conditional exception rather than the default, remains identical in IAS 38 today.
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Scope & Applicability (Historical)
What IAS 9 covered
IAS 9 applied specifically to accounting for research and development activities and costs – a narrower scope than IAS 38's later, much broader coverage of intangible assets generally (patents, trademarks, licences, goodwill-adjacent items, and more).
IAS 38 later absorbed IAS 9's content as merely one part (internally generated development costs) of a far more comprehensive intangible asset framework.
Key definitions you must know (historical)
Research (original)
Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding.
Development (original)
The application of research findings/knowledge to a plan or design for the production of new/substantially improved materials, devices, products, processes, systems, or services, prior to commercial production.
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The Research vs Development Distinction (with worked example)
Where genuine "research" ends and "development" begins
IAS 9 recognised the distinction was often genuinely difficult to draw in practice – providing examples: research includes activities aimed at discovering new knowledge, or searching for applications of research findings; development includes designing/testing prototypes, and designing tools/jigs/moulds involving new technology.
Example 1: Classifying pharmaceutical R&D spending
A pharmaceutical company spends $2,000,000 on early-stage laboratory investigation of a novel chemical compound's properties (no defined product target yet), and $5,000,000 on designing and testing a prototype formulation for a specific drug candidate that has passed initial feasibility screening.
The $2,000,000 early-stage investigation is RESEARCH – no specific product/process is yet targeted, so it is expensed immediately. The $5,000,000 prototype design/testing is DEVELOPMENT – it applies existing knowledge toward a specific, identified drug candidate – potentially eligible for capitalisation if IAS 9's specific criteria (Section 6) are met.
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Research Costs – Always Expensed
No exceptions, regardless of eventual success
IAS 9 required all research costs to be recognised as an expense in the period incurred – there was no capitalisation option for research, regardless of how promising the investigation eventually turned out to be. This reflects the Framework's view that, at the time research costs are incurred, no sufficiently probable/reliable future economic benefit yet exists – a position carried forward identically into IAS 38 today.
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Development Costs – Conditional Capitalisation
The exception, not the rule
Development costs were capitalised only if the entity could demonstrate all of a specific set of criteria (Section 6) were satisfied – otherwise, they too were expensed as incurred. This "expense unless proven otherwise" default mirrors research's treatment, differing only in that development offers a genuine pathway to overcome that default presumption.
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The Original Capitalisation Criteria (with worked example)
The direct ancestor of IAS 38's "PIRATE" criteria
IAS 9 required an entity to demonstrate: the product/process was clearly defined, and costs separately identifiable; the technical feasibility of the product/process had been demonstrated; management intended to produce/market the product or use the process; a market existed (or, for internal use, its usefulness to the entity could be demonstrated); adequate resources existed (or were reasonably expected) to complete the project; and costs could be measured reliably.
Example 2: Applying the capitalisation criteria
Continuing Example 1: the $5,000,000 development spending relates to a drug candidate that has passed feasibility screening, has a clearly defined target indication, management intends to bring to market (subject to regulatory approval), a clear market exists for the treatment, and the company has secured funding sufficient to complete Phase 3 trials.
All six criteria appear satisfied – the $5,000,000 development cost qualifies for capitalisation as an intangible asset, to be amortised once commercial production/use begins (Section 7). If any single criterion were not met (e.g. regulatory approval considered highly uncertain, undermining "intention to market"), the cost would instead be expensed.
These six criteria are, almost word for word, the same criteria IAS 38 requires today for capitalising internally generated development costs – commonly remembered via the mnemonic "PIRATE" (Probable future economic benefits, Intention to complete, Resources adequate, Ability to use/sell, Technical feasibility, Expenditure reliably measured).
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Amortisation of Capitalised Development Costs
Systematic allocation over the commercial life
Once capitalised, development costs were amortised systematically over the period expected to benefit from commercial production/use of the product or process – commencing when commercial production begins, and not exceeding a period during which the associated future economic benefits are expected to be realised. This mirrors IAS 38's own amortisation requirement for finite-life intangible assets today.
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Why IAS 9 Was Absorbed into IAS 38
Folded into a comprehensive intangible assets standard
As the IASC developed a far more comprehensive standard covering all types of intangible assets (patents, licences, brands, customer lists, and more) – not just R&D specifically – it made sense to fold IAS 9's research/development distinction directly into that broader standard, IAS 38, rather than maintaining IAS 9 as a separate, narrower standard. IAS 9 was formally withdrawn upon IAS 38's 1998 issuance.
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Disclosure Requirements (Historical)
Required disclosures under IAS 9
The accounting policy adopted for R&D expenditure The amount of R&D expenditure recognised as an expense in the period Movement in the carrying amount of capitalised development costs during the period
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Critical Judgments & Estimates (Historical)
Where management judgement mattered most
SIGNIFICANT JUDGEMENTS
Drawing the line between "research" and "development" for a given activity Whether all six capitalisation criteria were genuinely satisfied
SIGNIFICANT ESTIMATES
Period expected to benefit from commercial production/use, for amortisation purposes Reliable measurement of development costs directly attributable to the specific project
The research/development classification judgement was, even then, recognised as one of the most subjective areas of the standard – a limitation that persists identically under IAS 38 today.
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IAS 9 vs Modern IAS 38
Comparison – IAS 9 (1978/1993) vs current IAS 38
FeatureIAS 9 (withdrawn)Current (IAS 38)
Research vs development splitEstablished, with six capitalisation criteriaIdentical split and criteria, carried forward essentially unchanged
ScopeR&D specificallyAll intangible assets – R&D is just one component of a much broader standard
Indefinite-life intangiblesNot addressed (R&D-specific focus)Explicit treatment: no amortisation, annual impairment test instead
Business combination intangiblesNot addressedDetailed interaction with IFRS 3's acquisition method
IAS 9's R&D-specific principle and criteria proved so durable they were carried forward essentially verbatim into IAS 38 – the main change has been the vastly expanded scope surrounding that unchanged core.
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Statement Mapping (Historical, Under IAS 9)
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Research costs incurredSOPLAlways expensed, no exceptions
Development costs meeting all six criteriaSOFPCapitalised as an intangible asset
Development costs not meeting criteriaSOPLExpensed as incurred
Amortisation of capitalised development costsSOPL SOFPSystematic, over the commercial benefit period
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Related Standards – Cross-Reference Map
How IAS 9's legacy connects across the IFRS body of literature
StandardNature of the connection
IAS 38The direct successor, absorbing IAS 9's R&D criteria essentially unchanged within a much broader intangible assets framework
IFRS 3Governs recognition of R&D-related intangibles acquired in a business combination, a scenario IAS 9 never addressed
IAS 36Governs impairment testing of capitalised development costs and any resulting intangible assets
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Quick-Reference Glossary
PIRATE criteria
Probable future economic benefits, Intention to complete, Resources adequate, Ability to use/sell, Technical feasibility, Expenditure reliably measured – the six development capitalisation criteria, unchanged since IAS 9.
Commercial production
The point at which amortisation of capitalised development costs begins.
Research
Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding – always expensed as incurred.
Development
The application of research findings to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems, or services, prior to commercial production.
Intangible asset
An identifiable non-monetary asset without physical substance – the category into which capitalised development costs are classified under IAS 38.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows