I understand that legal costs and registration fees related to registering a patent can be capitalized. But what if it is pending?

It could be pending for years and then it could be rejected. Do you only capitalize once it has been registered so there is certainty over it?

If you think about the matching principle then this should make sense. You wouldn't capitalize these type of costs until there is an asset to which the expenses relate. Once the patent is granted then you would amortize the expenses related to generating the patent with the passage of time (over the lesser of the legal or useful life of the patent).

I'm not sure what you do in the event that it takes several periods (years) in order to grant the patent. You wouldn't expense them and you couldn't capitalize them.   

Thanks for the replies.

This is a conundrum to me. For conservatism, it seems a great risk to capitalize anything unless it is almost certain the patent will be granted.

On the other hand, if it is granted in 2011 I am not sure about capitalizing costs that relate to 2010 and prior periods....