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In 1974, the FASB considered requiring the expensing of all in-house research and development (R&D)...

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Accounting

In 1974, the FASB considered requiring the expensing of all in-house research and development (R&D) expenditures. The Board received many comments predicting that if firms were required to expense R&D, they would significantly cut back on research expenditures to avoid hurting reported earnings. Subsequent to the adoption of pre- Codification FASB Statement No. 2, such an impact proved to be difficult to document.

What are the pros and cons of expensing R&D and what effect would such policy have on current and future expenditures? Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles? How are these intangibles accounted under U.S. GAAP and IFRS?

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