Which of the following is a criterion for capitalizing development costs?

• A. A Technically feasible to complete the asset
• B. B Immediate profitability is guaranteed
• C. C Sufficient resources are not required
• D. D Ability to avoid tax

Answer: (A)

Capitalizing development costs hinges on proving that the asset can be completed and will generate probable future economic benefits. The key requirement is technical feasibility to finish the development, meaning the project can be completed, and there is a reasonable expectation that it will yield future benefits. Alongside this, other conditions are typically needed—such as the entity’s intention and ability to use or sell the asset, the existence of a market or clear use, probable future benefits, and that there are adequate resources and reliable measurement of costs. Profitability being guaranteed is not necessary, and tax considerations don’t determine whether costs can be capitalized. The idea that resources aren’t required is inconsistent with the need to have sufficient resources to complete and use the asset. So the ability to demonstrate technical feasibility to complete the asset is the correct criterion for capitalization.