Research and Development-Financial Reporting

question 137

Essay

Research and development-financial reporting
Alert Industries has spent $5 billion over the last three years in developing a new drug labeled BJ13.FDA approval is expected by the end of the month,at which time the drug will be available for sale.None of Alert's competitors has a product similar to BJ13,and the medical community is anxiously awaiting availability of this drug.Although BJ13 promises to be a "wonder drug" with huge financial success,Alert's income statements for the last few years have shown substantial losses and Alert's balance sheet does not include product BJ13 among the assets of the business.
Explain why one of Alert's seemingly most valuable assets apparently has been omitted from the balance sheet,and why Alert's income statements for the past few years reported substantial losses.

---

Definitions:

Merchandise Returns

Merchandise returns are transactions in which customers return previously purchased goods to the seller, usually for a refund or store credit.

Collection Efforts

The process of pursuing payments of debts owed by individuals or businesses.

Receiving Cash

The process involving the collection or receipt of cash in a business transaction.

Not Satisfied

A term indicating that expectations, requirements, or conditions have not been met to an adequate degree.