CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements is (are) true with respect to expensing or capitalizing intangible costs?

I. When developing patented content internally, only the legal expenses associated with the patent may be capitalized.
II. The cost associated with acquiring a brand must be expensed in the year of the acquisition.
III. The costs involved in developing software should be capitalized.
IV. In general, research and development expenses may be capitalized as per the matching principal.
A. I only
B. II and III
C. I and IV
Explanation: II is incorrect because such costs may indeed be capitalized.

III is incorrect because development costs may only be capitalized after the software becomes feasible.

IV is incorrect because R&D expenditures are actually expensed in the year they occur. This procedure complies with the conservatism principle in which R&D activities are not always expected to pay off and thus should be expensed rather than capitalized.

User Contributed Comments 1

User Comment
Mhmdjamal why it isnot mentioned whether IFRS OR GAAP used???
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