The Arnett Corporation Is Contemplating Building a Research and Development

question 65

Essay

The Arnett Corporation is contemplating building a research and development facility and performing R&D activities in the area of robotics. The president of the company is interested in the accounting required for R&D costs such as materials, facilities, personnel costs, equipment, intangibles purchased from others, and any indirect costs. Arnett's president has asked the company's controller to describe current GAAP requirements with respect to R&D expenditures.
Required:
a.Based on current GAAP, describe the accounting and reporting requirements for R&D expenditures such as the ones listed above.
b.Describe the rationale that was used by the FASB in its decision to account for R&D costs as prescribed in your answer to requirement a.

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Definitions:

Tender

Describes a quality of being soft or delicate to touch, often used medically to indicate sensitivity or pain upon pressure.

Temporomandibular Joint

The joint connecting the lower jaw (mandible) to the skull, located in front of each ear, enabling jaw movement.

Crepitation

The crackling or popping sound and sensation produced under the skin and joints or by the rubbing of fractured parts of a bone.

Hyoid Bone

A horseshoe-shaped bone in the neck that supports the tongue and is involved in the process of swallowing.