Page 44 -

Notes to the Consolidated Financial Statements

31st March 2016

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.8 Intangible assets (Continued)

(b) Deferred development costs

Research expenditure is recognised as an expense as incurred. Costs incurred on
development projects (directly attributable to the design and testing of new or improved
products) are recognised as intangible assets when the following criteria are fulfilled:

(i) it is technically feasible to complete the developing/developed product so that it will be
available for use or sale;

(ii) management intends to complete the developing/developed product and use or sell it;

(iii) there is an ability to use or sell the developing/developed product;

(iv) it can be demonstrated how the developing/developed product will generate probable
future economic benefits;

(v) adequate technical, financial and other resources to complete the development and to
use or sell the developing/developed product are available; and

(vi) the expenditure attributable to the developing/developed product during its
development can be reliably measured.

Other development expenditures that do not meet these criteria are recognised as expenses as
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 over a period of 30 months to reflect the pattern in which the relevant economic benefits
are recognised. Development assets are tested for impairment annually, in accordance with HKAS
36.

42 ALCO HOLDINGS LIMITED ANNUAL REPORT 2016