Research and development costs are recorded as assets or expenses?

Expense

INTERNATIONAL TREATMENT There is notable difference between the UK and international treatment that the UK has a separate standard for the treatment of R&D (SSAP13), whereas under International Accounting Standards the accounting for R&D is dealt with under IAS38 (Intangible Assets).
Recognition IAS38 states that an intangible asset is to be recognized if, and only if, the following criteria are met:1.
it is probable that future economic benefits from the asset will flow to the entity the cost of the asset can be reliably measured.
The above recognition criteria look straightforward enough, but in reality it can prove to be very difficult to assess whether or not these have been met.
In order to make the recognition of internally-generated intangibles more clear-cut, IAS38 separates an R&D project into a research phase and a development phase.
Research Phase It is impossible to demonstrate whether or not a product or service at the research stage will generate any probable future economic benefit.
As a result, IAS38 states that all expenditure incurred at the research stage should be written off to the income statement as an expense when incurred, and will never be capitalized as an intangible asset.
Development Phase Under IAS38, an intangible asset arising from development must be capitalized if an entity can demonstrate all of the following criteria:1.
the technical feasibility of completing the intangible asset (so that it will be available for use or sale)2.
intention to complete and use or sell the asset3.
ability to use or sell the asset4.
existence of a market or, if to be used internally, the usefulness of the asset5.
availability of adequate technical, financial, and other resources to complete the asset6.
the cost of the asset can be measured reliably.
If any of the recognition criteria are not met then the expenditure must be charged to the income statement as incurred.
Note that if the recognition criteria have been met, capitalization must take place.
Treatment of Capitalized Development Costs Once development costs have been capitalized, the asset should be amortized in accordance with the accruals concept over its finite life.
Amortization must only begin when commercial production has commenced (hence matching the income and expenditure to the period in which it relates).
Each development project must be reviewed at the end of each accounting period to ensure that the recognition criteria are still met.
If the criteria are no longer met, then the previously capitalized costs must be written off to the income statement immediately.

EXPENSE

it will treated as asset if its capital nature,if not treat as expense

The costs that are incurred during the development and introduction of new products to market or during the improvement of existing products.
Although R&D costs tend to penalize current profits, they eventually benefit the firm's future profits when new products developed as a result of the research become profitable themselves.
Many analysts regard a high proportion of sales revenue devoted to R&D as a positive sign relative to a firm's profit potential and future stock price

As per IFRS research cost is expensed off and development cost is capitalised only if it results in creation of a technically feasible intangible asset.

2.
Expenses

it will be assets

expenses