ASC 730 Research and Development

The Research and Development Topic establishes standards of financial accounting and reporting for research and development costs. The Overall Subtopic specifies:

1. Those activities that shall be identified as research and development for financial accounting and reporting purposes
2. The elements of costs that shall be identified with research and development activities
3. The accounting for research and development costs
4. The financial statement disclosures related to research and development costs.

This Subtopic provides guidance on research and development arrangements. Research and development arrangements have been used to finance the research and development of a variety of new products, such as information processing systems, medical technology, experimental drugs, electronic devices, and aerospace equipment. Entities may enter into arrangements for any of the following reasons:

1. To transfer all or part of the uncertainty and risk involved with the research and development to others
2. To obtain the benefit of funds that are made available because of tax incentives for investors
3. To attract qualified research and development personnel who otherwise might be concerned that funding might not be assured
4. To avoid expanding the ownership of the entity and the impact on earnings per share (EPS) that would result from issuing equity securities
5. To avoid debt service expenditures and the impact on the entity’s debt-to-equity ratio that would result from issuing debt securities
6. To avoid the impact on the entity’s near-term earnings that would result if it incurred the related research and development expenses.