Accounting for R & D

Question 1

How is R & D treated under US GAAP?

Answer 1

Under US GAAP, the only acceptable method of accounting for R & D is a direct charge to expense

Question 2

What are items capitalized under US GAAP?

Answer 2

1. Materials, equipment, or facilities that have alternative future uses (then capitalize and depreciate the assets over their useful lives)
2. R & D costs of any nature undertaken on behalf of others under a contractual arrangement

Question 3

What are items not considered as R & D?

Answer 3

1. Routine periodic design changes
2. Marketing research
3. Quality control testing
4. Reformulation of a chemical compound

Question 4

How does advance on R & D, which is required to be refunded back upon successful completion of the project?

Answer 4

When repayment depends solely on the results of the R & D having future economic benefits, the advance must be expensed