Research and Development Costs

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:28AM in AAT student discussion
How do I account for pure research, applied research and development costs in year end accounts to comply with standard accounting practice. Are there any permissable accounting treatments?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Research and Development Costs

    If your expenditure is for research purposes only i.e it isn't expenditure incurred bringing a new product to the market then you are obliged to treat the expenditure as an expense and put it through the P&L account. If the expenditure has been incurred bringing a new product to the market ( or in the process of doing so ) then you may open an account in the balance sheet called 'Defered R&D Expenditure' and record all your expenditure there.<BR><BR>There are criteria for this so that SSAP13 is satisfied :<BR><BR>The project is clearly defined<BR>You can identify the expenditure which is unique to the project<BR>The outcome will result in the product making a profit<BR>The company has enough resource to finish the project<BR><BR>When you first make sales of the new product you then release the 'Deferred R&D Expenditure' to the P&L (amortisation) pro-rata to the sales income.<BR><BR>Hope this is useful<BR><BR>David<BR><BR><BR>

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