- US GAAP
ASC 730 comprises two Subtopics, below is an overview of each Subtopic.
ASC 730-10 notes the following:
The Research and Development Topic establishes standards of financial accounting and reporting for research and development costs. The Overall Subtopic specifies:
- Those activities that shall be identified as research and development for financial accounting and reporting purposes
- The elements of costs that shall be identified with research and development activities
- The accounting for research and development costs
- The financial statement disclosures related to research and development costs.
ASC 730-20 notes the following:
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:
- To transfer all or part of the uncertainty and risk involved with the research and development to others
- To obtain the benefit of funds that are made available because of tax incentives for investors
- To attract qualified research and development personnel who otherwise might be concerned that funding might not be assured
- To avoid expanding the ownership of the entity and the impact on earnings per share (EPS) that would result from issuing equity securities
- To avoid debt service expenditures and the impact on the entity’s debt-to-equity ratio that would result from issuing debt securities
- To avoid the impact on the entity’s near-term earnings that would result if it incurred the related research and development expenses.