Research and Development Arrangements
SFAS 68, October 1982
“Research and Development Arrangements”
“Research and Development Arrangements”
Research and development arrangements
Research and development is funded by other parties
Forms of research and development arrangements
1. Liability to repay to other parties
2. Obligation to perform contractual services
3. Loan to other parties
4. Issuance of warrants
2. Obligation to perform contractual services
3. Loan to other parties
4. Issuance of warrants
Liability to repay to other parties
1. If repayment is required regardless of the result of R&D activities
–> recognize it as a liability
–> recognize it as a liability
2. R&D costs are expensed as incurred
Obligation to perform contractual services
1. If repayment of loan depends on the result of R&D activities
–> this obligation is a contract to perform R&D for others
–> this obligation is a contract to perform R&D for others
2. Apply accounting for contract revenue and costs
Loan to other parties
If repayment of loan depends on the result of R&D activities
–> the loan is charged to R&D expenses
–> the loan is charged to R&D expenses
Issuance of warrants
If warrants are issued by R&D arrangement
–> the fair value of the instrument is
–> reported as paid-in capital
–> the fair value of the instrument is
–> reported as paid-in capital