i. Explanation of Research and Development Terms

1. Research:
   Research refers to the original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge. It is primarily focused on discovering new information or developing new products or processes. Research activities typically occur at the initial stages of a project and are generally considered uncertain in terms of their outcome.

   Examples of Research:

   • Conducting experiments to discover new materials for product development.
   • Investigating new methods to improve production efficiency or product quality.
2. Development:
   Development involves 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, or services. This phase takes the theoretical knowledge gained from research and applies it to create a viable product or service.

   Examples of Development:

   • Creating a prototype of a new software application after the research phase has established its feasibility.
   • Developing a new drug formulation for commercial use after successful clinical trials have been completed.

ii. Conditions for Recognizing Development Costs as an Intangible Asset

According to IAS 38 – Intangible Assets, development costs can be recognized as an intangible asset if the following conditions are satisfied:

1. Technical Feasibility:
   The company must demonstrate that the project is technically feasible to complete the intangible asset so that it will be available for use or sale.
2. Intention to Complete and Use:
   There must be an intention to complete the intangible asset and use it or sell it once it is developed.
3. Ability to Use or Sell:
   The company must demonstrate its ability to use or sell the intangible asset once it is developed.
4. Future Economic Benefits:
   It must be probable that the future economic benefits attributable to the intangible asset will flow to the company. This can include revenues from the sale of products or services related to the asset.
5. Availability of Resources:
   The company must have adequate resources (technical, financial, or other) to complete the development and to use or sell the intangible asset.