Accounting for research and development
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Accounting for Research and Development in Ruritania
The objective of this report is to prescribe a conceptual basis for Research and Development costs in Ruritania. After having exposed the main problems raised by the accounting of R&D, we will examine those issues in the light of appropriate accounting concepts, and then express our recommendations for the RASB.
I) Problems relating to accounting for Research and Development:
a) A fundamental problem of definition:
Some accounting standards such as IAS 9 tend to define R&D by distinguishing Research and Development, and provide a list of included and excluded R&D activities. Other standards, such as the SSAP13, distinguish Pure Research from Applied Research and Development with an industry-specific orientation. This difference points to the fact that there is no universal definition for "Research" and "Development". We can therefore imagine that some activities might be reported as R&D activities by some firms and not by others. This point stresses the importance to define clearly "Research" and "Development" within the RASB standards.
b) The uncertain character of R&D:
According to Ronald Zhao , R&D is an economic investment activity that drives corporate growth, innovations/inventions and technological advances. This implies that R&D can be considered as an asset , e.g...