Research and Development and Start Up costs associated with development are expensed as incurred. Explain the rationale? Do you feel that this treatment is consistent with accounting principles? Why or why not?© BrainMass Inc. brainmass.com June 3, 2020, 7:52 pm ad1c9bdddf
The rationale of expensing R&D costs under generally accepted accounting principles is not a valid supposition. Considering the matching principle, R&D costs that result in a viable product should be amortized over the product life - often a patent. The life is defined; the costs are defined and the issue is fairly straight forward.
Further, R&D costs that don't result in a marketable product would be written off at a point in ...
The solution gives a little history about R&D in the drug industry and explains the reasons for allowing for write-offs of R&D. It provides a conclusion about that politics of those writeoffs.