Ind AS 38
Active
Intangible Assets
Prescribes the recognition, measurement and amortisation of intangible assets, including the research/development split, converged almost exactly with IAS 38.
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Conceptual Framework Linkage
Identical recognition philosophy to IAS 38
Ind AS 38 applies the IDENTICAL principle as IAS 38 – an intangible asset is recognised ONLY when it is IDENTIFIABLE, the entity has CONTROL, future economic benefits are PROBABLE, and cost can be measured RELIABLY, with research costs EXPENSED and development costs CAPITALISED only once specific criteria are met.
HOW IND AS 38 MAPS TO THE FRAMEWORK
Prudence in R&D capitalisation – the strict research/development split PREVENTS speculative capitalisation of uncertain future benefits – identical to IAS 38 Indian IT/pharma relevance – India's LARGE software services/product and pharmaceutical (generic drug R&D) sectors make Ind AS 38's development cost capitalisation criteria GENUINELY significant and frequently judgement-intensive in Indian practice
Ind AS 38 introduced NO substantive change to the recognition framework relative to IAS 38 – its Indian relevance is most pronounced for the FREQUENCY of R&D capitalisation judgements in technology/pharma sectors.
Research vs development – identical distinction to IAS 38
PhaseTreatment
ResearchEXPENSED as incurred (no reliable future benefit demonstration possible)
DevelopmentCAPITALISED once six specific criteria are met
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Scope & Applicability
What Ind AS 38 covers
Ind AS 38 applies to intangible assets EXCLUDING those covered by other standards (e.g. Ind AS 115 contract costs, Ind AS 109 financial assets, goodwill under Ind AS 103) – IDENTICAL scope to IAS 38.
Key definitions you must know
Identifiability
IDENTICAL definition to IAS 38 – separable from the entity, OR arising from contractual/legal rights.
Development phase
Application of research findings to a plan/design for production of new/improved materials, products, processes – identical to IAS 38.
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Recognition Criteria – Identifiability, Control, Future Benefits
Identical to IAS 38
Identifiability, control (usually through legal rights), and probable future economic benefits – IDENTICAL three-part test to IAS 38, alongside the reliable cost measurement requirement.
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Research Phase vs Development Phase
Identical six development criteria to IAS 38
Example 1: Software development cost capitalisation
An Indian software company incurs ₹2,00,00,000 exploring GENERAL feasibility of a new product concept (research), followed by ₹5,00,00,000 building a specific, technically feasible product with demonstrated market demand and adequate resources to complete it (development), meeting ALL six of Ind AS 38's development capitalisation criteria.
The ₹2,00,00,000 research cost is EXPENSED as incurred. The ₹5,00,00,000 development cost is CAPITALISED as an intangible asset, since ALL SIX criteria (technical feasibility, intention to complete, ability to use/sell, probable future benefits, adequate resources, reliable cost measurement) are met – an IDENTICAL application to how IAS 38 would treat the same software development project globally.
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Internally Generated Intangibles
Identical prohibitions to IAS 38
Internally generated GOODWILL, brands, mastheads, publishing titles, and customer lists are NEVER recognised as intangible assets – IDENTICAL prohibition to IAS 38, since they cannot be reliably distinguished from the cost of developing the business as a whole.
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Useful Life – Finite vs Indefinite
Identical to IAS 38
Finite-life intangibles are AMORTISED over their useful life; indefinite-life intangibles are NOT amortised but tested ANNUALLY for impairment under Ind AS 36 – IDENTICAL to IAS 38, relevant for Indian pharmaceutical patents (finite, tied to legal protection period) versus certain brand intangibles (potentially indefinite).
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R&D Capitalisation for Indian IT/Pharma Sectors
A practically prominent Indian application area
India's LARGE software product/services and generic pharmaceutical R&D sectors make Ind AS 38's research/development split and SIX-CRITERIA development capitalisation test GENUINELY significant and frequently applied. Patent-related intangibles ALSO interact with India's Patents Act, 1970 framework – the LEGAL protection period under patent law often INFORMS (but does not by itself determine) the ACCOUNTING useful life estimate under Ind AS 38, which remains an economic/entity-specific judgement, IDENTICAL in principle to how IAS 38 treats patent-related useful life estimation globally.
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Website & Software Development Costs
Identical to IAS 38 (via SIC-32 equivalent guidance)
Website development costs are assessed against the SAME research/development framework, with PLANNING stage costs expensed and APPLICATION/infrastructure development stage costs potentially capitalised if criteria are met – IDENTICAL to IAS 38's own SIC-32-derived guidance.
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Disclosure Requirements
Identical disclosure requirements to IAS 38
Useful lives/amortisation rates and methods Gross carrying amount and accumulated amortisation reconciliation Aggregate R&D expenditure recognised as an expense
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Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
Distinguishing the research phase from the development phase Whether all six development capitalisation criteria are genuinely met
SIGNIFICANT ESTIMATES
Useful life estimation, particularly for patents and technology intangibles
Indian pharma/IT companies should maintain CONTEMPORANEOUS documentation supporting the research-to-development transition point, given the genuinely significant P&L impact of this judgement.
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Ind AS 38 vs IAS 38 – Full Comparison
Comprehensive comparison table
FeatureIAS 38Ind AS 38
Research/development split, recognition criteria, useful life modelStandard modelIDENTICAL – no substantive divergence
Practical application contextVaries by jurisdiction/industryEspecially prominent in India's large IT/software and pharmaceutical R&D sectors
Ind AS 38 is essentially IDENTICAL to IAS 38 in substance – its distinctive Indian relevance lies in the FREQUENCY of R&D capitalisation judgements, not any accounting divergence.
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Statement Mapping
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Research cost incurredP&LExpensed as incurred, identical to IAS 38
Development cost capitalisedBalance SheetRecognised as an intangible asset
Amortisation expenseP&L Balance SheetIdentical to IAS 38
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Related Standards
Cross-reference map
StandardConnection
IAS 38The global counterpart standard, near-identically converged
Ind AS 36Governs impairment testing of indefinite-life intangibles annually, and finite-life intangibles when indicators exist
Ind AS 103Governs recognition of intangible assets acquired in a business combination
Quick-reference glossary
Six development criteria
Technical feasibility, intention to complete, ability to use/sell, probable future benefits, adequate resources, reliable cost measurement – identical to IAS 38.
Patents Act, 1970
India's statutory patent protection framework, informing (but not determining) accounting useful life estimates for patent intangibles.
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Glossary
Six development criteria
Technical feasibility, intention to complete, ability to use/sell, probable future benefits, adequate resources, reliable cost measurement – identical to IAS 38.
Patents Act, 1970
India's statutory patent protection framework, informing (but not determining) accounting useful life estimates for patent intangibles.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows