The Theoretical Justification for Expensing Research and Development (R&D) Cost

question 24

Multiple Choice

The theoretical justification for expensing research and development (R&D) cost as it is incurred is based on which of the following arguments?

• A) R&D costs provide no future benefits, thus it does not meet the definition of an asset
• B) R&D costs are incurred to generate current period revenue; thus the matching concept requires that it be expensed as incurred.
• C) Whether R&D costs that have been incurred will provide future benefit is uncertain, thus it does not meet the definition of an asset.
• D) Since R&D costs have been incurred during the current period, they meet the definition of an expense.

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Definitions:

Greater Than

Greater Than is a mathematical symbol (>) used to indicate that the value on the left side is larger than the value on the right side.

Undifferentiated Targeting Strategy

A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups.

Marketers

Professionals involved in the process of promoting, selling, and distributing a product or service.

Pencils

Writing instruments made of graphite (or a similar substance) encased in wood or a mechanical holder, used for drawing or writing.