Section 11(2) in The Cost Accounting Records (Petroleum Industry) Rules, 2002
(2)The method of charging these expenses to the cost of products or activities under reference and all other products shall be indicated in the cost records. Where the utility of such research and development work extends over more than one financial year, such expenses shall be treated as deferred revenue expenses and charged to the cost of production of the product or activities under reference and all other products if any, on a reasonable basis and applied consistently in line with the accepted standards and practices. The detailed criteria on which it is decided to extend the utility period of these expenses to more than one financial year shall be disclosed in the cost records. The following criteria, which are only indicative and not exhaustive, may be adopted in such cases:(i)the output or process is clearly defined and the costs attributable to the output or process can be separately identified;(ii)the technical feasibility of the output or process has been demonstrated;(iii)the management of the enterprise has indicated its intention to produce and market or use the output or process;(iv)there is a reasonable indication that current and future research and development costs to be incurred on the project together with expected production, administrative and selling costs are likely to be more than covered by related future revenues or benefits; and(v)adequate resources exist or are reasonably expected to be available to complete the project and market the output or process.
