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Codification Topic 730: Research and Development

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Codification Topic 730
Research and Development

Research and Development Costs

SFAS 2, October 1974
"Accounting for Research and Development Costs"

General rule for research and development costs
Research and development costs are
--> charged to expense when incurred
--> because future economic benefits are uncertain

Research and development (R&D) costs
1. tangible assets
2. intangible assets
3. personnel costs
4. indirect costs
5. contract costs
6. computer software costs

Tangible assets acquired for R&D activities
1. If the assets have alternative future uses
--> capitalized as an asset
--> cost of consumption or depreciation is charged to expense

2. If the assets do not have alternative future uses
--> expensed at the time of acquisition

Intangible assets acquired for R&D activities
1. If the assets have alternative future uses
--> capitalized as an asset
--> amortization is charged to expense

2. If the assets do not have alternative future uses
--> expensed at the time of acquisition

Personnel costs, indirect costs, contract costs
--> expensed when incurred

Computer software costs
1. Software developed internally for R&D activities
--> all costs are expensed when incurred
--> alternative future uses are not considered
--> development phases are not considered

2. Software purchased for R&D activities
(1) if the software has alternative future uses
--> capitalize as an intangible asset
--> amortization is charged to expense

(2) if the software does not have alternative future uses
--> expensed when incurred