Measure phase

The research versus development test

Measure

IAS 38 splits internally generated intangibles into a research phase, always expensed, and a development phase, capitalised only when six conditions are all met IAS 38 §54-62. For token spend the boundary is the moment feasibility is established and the entity commits to building a specific asset. Tokens before that line are research; tokens after it, meeting the conditions, are capitalisable.

The boundary under IAS 38

Research is original, planned investigation undertaken to gain new knowledge, and expenditure on it is expensed because the entity cannot yet demonstrate that an asset generating probable future benefits exists. Development is the application of research findings to a plan for a specific asset before it is in use. The crossing point is where technical feasibility and the intention and ability to complete the asset can be shown IAS 38 §54-62.

Applied to token spend

Research tokens: exploratory prompting, comparing whether a fine-tune or retrieval approach could work at all, proof-of-concept trials with no committed asset.
Development tokens: fine-tuning the chosen model, building and evaluating the specific asset once feasibility is established, generating datasets that become part of it.
Neither: run-phase serving, which is an operating cost regardless of phase.

The six conditions

Development expenditure is capitalised only where the entity can demonstrate all of: technical feasibility of completion; intention to complete and use or sell; ability to use or sell; how probable future economic benefits will be generated; availability of adequate technical, financial and other resources to complete; and the ability to measure the attributable expenditure reliably IAS 38 §54-62. Fail one and the spend is expensed.

Evidencing the crossing point

The auditor will ask when development began and what marked it. A dated feasibility assessment, an approved build decision, and the phase marker flipping on the tagged requests together evidence the crossing. Because token spend is metered and tagged, the crossing can be pinpointed in the ledger rather than asserted, which is a stronger position than most internally generated intangibles can offer.