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8. Research and development expenditure

EUR 1,000 2020 2019
Product development expenses incurred during the year, befofre capitalization of development costs -7,030 -6,234
Capitalization of development costs 3,403 2,947
Product development expenses recognised in income statement total -3,627 -3,287
Product development expenses in relation to net sales recognised in income statement 6.9 % 7.0 %
Product development expenses in relation to total expenses recognized in income statement 13.0 % 9.6 %
Research costs are charged to the income statement as incurred. Development costs for new products are capitalized when they meet the requirements of IAS 38 Intangible assets. They are amortized over the useful lives of the related products. At Tecnotree development costs are monitored on a project-by-project basis and management decides on the capitalization separately for each project. In order to qualify for capitalization the following criteria are to be met: the results of a project are of use to several customers, the contents, objectives and timetable of a project are documented and a profitability calculation is prepared. Capitalization of product development costs that fulfil IFRS criteria starts when following requirements are met: a product’s functional requirements and the plans for product industrialization, testing and project are complete and have been approved as well as future economic benefits are expected from the product. The useful life of capitalized development expenditure is 3 years, and they are amortized on a straight-line basis over this period from the start of commercial use. The intangible assets that are not yet ready for use are tested annually for impairment. The recoverable amount of these assets is based on estimated future cash flows from sales and/or use of the asset.