Treatment of development costs
‘(1) Where development costs are shown as an asset in a company’s accounts, any amount shown in respect of those costs is treated—
(a) for the purposes of section (Distributions to be made only out of profits available for the purpose) (distributions to be made out of profits available for the purpose) as a realised loss, and
(b) for the purposes of section (Distributions by investment companies out of accumulated revenue profits) (distributions by investment companies out of accumulated revenue profits) as a realised revenue loss.
This is subject to the following exceptions.
(2) Subsection (1) does not apply to any part of that amount representing an unrealised profit made on revaluation of those costs.
(3) Subsection (1) does not apply if—
(a) there are special circumstances in the company’s case justifying the directors in deciding that the amount there mentioned is not to be treated as required by subsection (1),
(b) it is stated—
(i) in the case of Companies Act accounts, in the note required by regulations under section 378 as to the reasons for showing development costs as an asset, or
(ii) in the case of IAS accounts, in any note to the accounts,
that the amount is not to be so treated, and
(c) the note explains the circumstances relied upon to justify the decision of the directors to that effect.’.—[Margaret Hodge.]