Research & Development (R&D)

The ongoing costs of running a business, including salaries, rent, utilities, marketing, and professional services. Unlike capital expenditure, OpEx is expensed immediately on the income statement.

The unintended transfer of knowledge from one firm or sector to others, creating wider economic benefits that the original investor cannot fully capture. Knowledge spillovers are a defining characteristic of intangible investment and a key justification for public policy support of R&D, education, and innovation.

The systematic monitoring and management of a collection of investments. For VC and PE firms, portfolio oversight includes tracking financial performance, productivity metrics, intangible asset development, and strategic milestones across all portfolio companies.

A vehicle equipped with sensors, software, and AI systems that enable it to navigate and operate without direct human input. Autonomous vehicles represent a convergence of multiple high-value intangible assets, including proprietary algorithms, trained machine learning models, mapping data, sensor fusion technology, and safety validation datasets.

The application of biological sciences to develop products, processes, and services across sectors including pharmaceuticals, biotechnology, medical devices, agricultural technology, and environmental science. Biosciences companies are among the most intangible-asset-intensive businesses in the global economy, with value concentrated in patents, regulatory approvals, clinical trial data, proprietary compounds, and specialised human capital.

A specific type of innovation, defined by Clayton Christensen, that creates a new market and value network by initially targeting underserved segments with simpler, more affordable solutions before eventually displacing established competitors. Disruptive innovation differs from sustaining innovation, which improves existing products for current customers.

In-process research and development (IPR&D) is a project acquired part-way through — bought as a standalone asset or picked up in a business combination — where the underlying work is incomplete at the acquisition date. Its treatment differs sharply from the same activity performed in-house, and the difference is a common source of confusion.

The practice of quantifying an organisation's innovation inputs, processes, outputs, and outcomes to assess the effectiveness of innovation investment and guide strategic decision-making. Innovation measurement encompasses metrics such as R&D spending as a percentage of revenue, patent filing rates, new product revenue share, time-to-market for new offerings, and return on innovation investment.

AI and IAS 38: When Can You Capitalise AI Development Costs?

IAS 38 sets six criteria for capitalising development costs, but applying them to AI projects is fraught with ambiguity. This article maps each criterion to AI development realities and provides practical guidance for CFOs and accountants navigating the recognition question.

How should companies capitalise AI investments under IAS 38?

Under IAS 38, AI development costs can be capitalised once technical feasibility, intent to complete, probable future benefits, and reliable cost measurement are demonstrated — research phase costs must be expensed.

What are the ASC 350 rules for software capitalisation?

ASC 350-40 requires capitalisation of internal-use software development costs during the application development stage, while preliminary project and post-implementation costs must be expensed.

How do I reduce founder dependency before selling?

Document the decisions and relationships only you hold, distribute customer contacts across your team, build a management layer, and withdraw from day-to-day operations in stages so the business demonstrably runs without you.