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:

Service Design Technique

A method or approach used in crafting services to make them more useful, usable, and desirable to customers, often involving tools like journey mapping and prototyping.

Automation

The use of machines and technology to perform tasks without human intervention, often to enhance efficiency and accuracy.

Modularizing

The process of breaking down a system into smaller, independent modules that can be developed, tested, and deployed separately.

External Product Development

The process of creating new products or making improvements with the aid of external partners or resources.