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Externally purchased patents and other similar intellectual property rights are stated at cost and amortised over the lesser of the patent life or licence term and the length of the research and development programme to which the patent or licence relates.
Software licences are stated at depreciated replacement cost. Amortisation is calculated on a straight-line basis over a period of three years.
Annual software licences are charged to the Statement of Comprehensive Net Expenditure in the year in which they are incurred.
Research costs are expensed as incurred. Development expenditure on an individual project is recognised as an intangible asset when the Group can demonstrate:
The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.
Its intention to use or sell the asset.
How the asset will generate future economic benefits.
The availability of resources to complete the asset.
The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. During the period of development, the asset is tested for impairment annually.
Inventories, representing the stock of goods for re-sale, are stated at the lower of cost and net realisable value.