R & D Flashcards
What’s the definition of Development?
The translation of research findings or knowledge into a plan or design of a new product or significant improvement in an existing product or process whether intended for sale or use. Development includes formulation, design and testing of product alternatives, construction of prototypes, and operation of pilot plans.
What’s the definition of Research?
The attempt to discover new knowledge aimed at the development of new products, services, processes, or techniques, or the significant improvement in an existing product.
Does not include market research.
Included in R&D are:
1- Lab Research
2- Conceptual formulation and design of possible products and process alternatives.
3- Modification of the formulation or design of a product or process.
4- Design, construction, and testing of production prototypes and models.
5- Design of tools, jugs, molds, and dies involving new technology.
6- Design of pilot plan.
Excluded from R&D are:-
1- Engineering follow thru
2- Quality control and routine testing
3- Trouble shooting
4- Adaptation of an existing capability to a particular customer’s needs
5- Routine design if tools, jigs, molds, and dies
6- Legal work in connection with patent application
7- Software development cost
Accounting for R&D:
R&D costs are expensed in the period incurred. R&D costs are labor costs, material costs, and overhead costs.
Accounting for fixed assets used in several R&D projects.
These assets are capitalized and annual depreciation is included in annual R&D costs. The debit is to R&D expense rather than depreciation expense; the credit is to accumulated depreciation.
Accounting for fixed assets used Temporarily in a R&D project.
The depreciation related to the time frame of the project is included in annual R&D costs.
Accounting for fixed assets used in a single R&D project, the asset has no alternative uses:
Even though the fixed asset has a useful life exceeding one year and the single R&D project will be in process for more than one year, the entire cost of the fixed asset is expensed as R&D immediately.
