Research and Development, ASC 730

SFAS 2, October 1974
“Accounting for Research and Development Costs”

Research and development costs are
–> charged to expense when incurred
–> because future economic benefits are uncertain

1. tangible assets
2. intangible assets
3. personnel costs
4. indirect costs
5. contract costs
6. computer software costs

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

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

–> expensed when incurred

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