Read the following extract and then complete the questions that follow.
Research expenditure is recognised as an expense as it is incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditure that do not meet these criteria are recognised as an expense incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life, which varies from 3 to 5 years?
a. Why does Bone Medical Ltd expense research costs?
b. In 2011, Bone Medical's research costs largely outweighed its revenue earned. Is this a concern for Bone Medical's investors? Why/why not?
c. Capitalised development costs are recorded as intangible assets and amortised over 3-5 years. Why?