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R&D Costs

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Why are research and development costs expensed? Is this consistent with how other similar costs are handled? Explain why or why not. Should research and development costs be expensed? Explain why or why not.

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R&D costs are expensed because the outcome of R&D expenses in most cases is uncertain. Only a small percentage of R&D projects actually materialize and become large scale commercial efforts. Not all R & D outlays lead to the development of marketable products. This is the main reason why R&D expenses are treated as expenses and not assets. ...

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