accounting help????

Question

Research and development costs for projects other than software development should be?
1.Expensed in the period incurred.
2. Expensed in the period they are determined to be unsuccessful.
3.Deferred pending determination of success.
or
4. Expensed if unsuccessful, capitalized if successful.

Answer 1

There is a difference in treatment depending on whether you follow US GAAP or IAS. Since I think you're from the US, my answer is based on GAAP which distinguishes between internally generated R&D and purchased R&D. The lack of uniformity in accounting for R&D and the increasing importance of R&D motivated FASB to issue SFAS 2, Accounting for Research and Development Costs, in October 1974. Because of the high degree of uncertainty of any resulting future benefit arising from R&D projects, SFAS 2 directs that all R&D costs be expensed as incurred. FASB settled for this conservative approach, which was already common practice, because of the uncertainty of future product success. SFAS 2 requires companies that acquire R&D from the outside, however, to capitalize and amortize these costs over time. Since your question wasn't specific enough, I take it that you're referring to internally generated R&D, so the answer is

1.Expensed in the period incurred.