The transportation sector is currently transitioning from fossil fuels to more environmentally friendly electric energy, as this sector is one of the largest contributors to greenhouse gas emissions. The use of electric vehicles is rapidly growing, with the largest market in China, followed by Europe and the United States. The development of electric vehicles heavily relies on the policies issued by their respective countries. Indonesia aims to become a global hub for the electric vehicle industry and must address challenges related to costs, standards, power generation, incentive support, communication security, and integration frameworks. In addition to these factors, if Indonesia wants to attract investors, it must pay attention to infrastructure readiness, ease of doing business, government policies, as well as research and development.
According to the Statement of Financial Accounting Standards (PSAK) 19 Intangible Assets, in determining whether an internally generated intangible asset qualifies for recognition, an entity classifies the process of generating the intangible asset into two phases: the research phase and the development phase. Research is the planned search or critical investigation aimed at discovering new knowledge that is expected to be useful in the development of new products or services (called products) or new processes or techniques (called processes) or in bringing about significant improvements to existing products or processes. Development is the translation of research findings or other knowledge into a plan or design for a new product or process or for significant improvement to existing products or processes, whether intended for sale or use. This includes conceptual formulation, design, and testing of product alternatives, construction of prototypes, and operation of pilot plants.
Research and development costs need to be considered to determine whether such costs should be capitalized or expensed as incurred. Furthermore, arrangements with other parties to conduct an entity’s research and development activities are often complex, requiring consideration to determine the appropriate accounting treatment.
During the research phase, an entity does not recognize an intangible asset arising from research (or from the research phase of an internal project). Expenditure on research (or from the research phase of an internal project) is recognized as an expense when incurred. In the research phase of an internal project, an entity cannot demonstrate that an intangible asset exists that will generate probable future economic benefits. Therefore, expenditure on research is always recognized as an expense when incurred. Examples of research activities include:
- Activities aimed at obtaining new knowledge;
- The search, evaluation, and final selection of applications of research findings or other knowledge;
- The search for alternatives for materials, devices, products, processes, systems, or services; and
- The formulation, design, evaluation, and final selection of possible alternatives for new or improved materials, devices, products, processes, systems, or services.
In the development phase, an intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, the entity can demonstrate all of the following:
- The technical feasibility of completing the intangible asset so that it will be available for use or sale.
- The intention to complete the intangible asset and use or sell it.
- The ability to use or sell the intangible asset.
- How the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself, or, if it is to be used internally, the usefulness of the intangible asset.
- The availability of adequate technical, financial, and other resources to complete the development and to use or sell the intangible asset.
- The ability to reliably measure the expenditure attributable to the intangible asset during its development.
In the development phase of a project, an entity may be able to identify an intangible asset and demonstrate that the asset will generate probable future economic benefits. This is because the development phase of a project is more advanced than the research phase. Examples of development activities include:
- Design, construction, and testing of prototypes and models before production or use;
- Design of tools, jigs, molds, and dies involving new technology;
- Design, construction, and operation of a pilot plant that is not of a scale economically feasible for commercial production; and
- Design, construction, and testing of new or improved materials, devices, products, processes, systems, or services.
