Under an amendment to the Accounting Act, effective as of 1 January 2018, the intangible results of research are no longer accounted for as a part of fixed intangible assets. Research is no longer considered an intangible asset, and this fact has consequences for the payout of profit shares.
At first glance, one might think there was no major change to accounting law in the area of intangible fixed assets, but one would be mistaken: as of 1 January 2018, research is no longer an intangible asset.
Let us call to mind that „research“ is the original and systematic quest for scientific or technical findings or knowledge, whereas the results are uncertain, and so is the timeframe within which they will be attained. By contrast, „development“ is the utilization of the results of research (or of other findings) by planning or designing new or substantially perfected materials, products, processes, systems, or services, prior to their commercial production or use. The defining criterion for development, unlike research, then, is technical feasibility, along with the ability to demonstrate the usefulness and the ability of the company to exploit or sell that which has been developed.
A special provision in the Accounting Act builds upon the prohibition of payouts of profit shares in Section 28, according to which the distribution of profit shares is restricted if and as long as development costs are accounted for among the balance sheet assets:
„If the balance sheet assets comprise development costs, then any payout of profit shares is prohibited, unless the disposable funds which would otherwise be used to make such payout are at least equal to that portion of the development costs which has not been depreciated.“
If you do have development costs on your balance sheet, be careful when accounting for them in your annual financial statements and when distributing profit shares.
Source: Accounting Act, as recently amended