Research & Development (R&D) Costs
Accounting for Innovation Costs
Under U.S. GAAP, most research and development (R&D) costs are expensed as incurred because future economic benefits cannot be measured reliably at the time the costs are incurred.
- Research activities are expensed.
- Development costs are generally expensed under U.S. GAAP.
- Purchased R&D may receive different treatment depending on applicable guidance.
- Certain software development costs follow specialized accounting rules.
Note
The general FAR rule is that internally incurred R&D costs are expensed unless specific GAAP guidance requires capitalization.
Summary
Most internally incurred research and development costs are recognized as expenses rather than assets.