8. Research and development expenditure

EUR 1,000 2019 2018

Product development expenses incurred during the year, befofre capitalization of development costs -6,234 -5,257
Capitalization of development costs 2,947 0
Product development expenses recognised in income statement total -3,287 -5,257

Product development expenses in relation to net sales recognised in income statement 7.0% 12.5%
Product development expenses in relation to total expenses recognized in income statement 9.6% 14.6%

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.

Product development expenses in relation to net sales and total expenses are disclosed in the Key figures section for five years.