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Notes in Research and Development Costs

1. Research costs involve discovering new knowledge through original investigation, while development costs involve improving existing knowledge through applying research findings or substantially improving materials, products, processes, or services. 2. Research costs are expensed outright, while development costs can be capitalized if certain criteria are met, such as technical feasibility and intention to complete and commercialize the asset. 3. The key distinction is that research involves discovering new knowledge, while development focuses on improving existing knowledge for commercial production.

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Renz Francis Lim
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277 views1 page

Notes in Research and Development Costs

1. Research costs involve discovering new knowledge through original investigation, while development costs involve improving existing knowledge through applying research findings or substantially improving materials, products, processes, or services. 2. Research costs are expensed outright, while development costs can be capitalized if certain criteria are met, such as technical feasibility and intention to complete and commercialize the asset. 3. The key distinction is that research involves discovering new knowledge, while development focuses on improving existing knowledge for commercial production.

Uploaded by

Renz Francis Lim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

Notes in Research and Development Costs RF LIM

Distinction between Research Cost and Development Cost


Parameters Research Costs Development Costs
Act Act of discovering new. Act of improving a knowledge which is
already obtained or at hand.
Use of resources Requires use of resources Requires us of resources.
Definition It is an original and planned It is the application of research findings or
investigation undertaken with the other or substantially improved material,
prospect of gaining scientific or device, product, process, system or
technical knowledge and service, prior to the commencement of
understanding. commercial production.
Examples 1. Laboratory research aimed of 1. Design, construction and testing of
research findings or obtaining production prototype and model.
new knowledge; 2. Design of tools, jigs, molds and dies
2. Searching for application of involving new technology.
research finding and other 3. Design, construction and operation of
knowledge; a pilot plant that is not of a scale
3. Conceptual formulation and economically feasible to the entity for
design of possible product or commercial production.
process alternative. 4. Design, construction and testing of a
4. Testing in search for product or chosen alternative for new improved
process alternative. product or process.
Treatment EXPENSE OUTRIGHT General Rule: Expensed.

Exception: (all the criteria for


recognition must be met)
1. Technical Feasibility if the intangible
asset so that it will be available for use
or sale;
2. The intention to complete the
intangible asset and use/sell it;
3. The ability to use or sell the intangible
asset;
4. How the intangible asset will generate
probable future economic benefits;
5. Availability of resources or funding to
complete development and to use or
sell the asset.
6. The ability to measure reliably the
expenditure attributable to the
intangible asset during the
development.

Keywords to Discovering, Searching, New Not Development Costs → Commercial


remember Knowledge, Conceptual production, Routine, Periodic.
Formulation, possible alternative

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