In Japan, the BADC issued Accounting Standard for Research and Development Costs in 1998. The Standard states that research and development costs should be charged to expense immediately when they are paid. This treatment is identical to that of U.S. GAAP. IAS 38 (1998), Intangible Assets, requires that research costs must be charged to expense immediately, but that development costs can be recognized as assets if certain criteria are met. Software production costs are recognized in Japan, depending on how the software will be used, unless they meet the definition of research and development costs.
IAS 38 and Japanese GAAP both require that intangible assets must be amortized over their useful lives and must be reviewed as to whether they are impaired when events indicated that any impairment might exist for such assets. In Japan, useful lives for amortization of intangible assets that are prescribed by tax laws are generally used for financial reporting purposes as well.