Knowledge that Transforms

R&D, Expensing R&D, FASB standard No. 2

Accounting changes, LIFO, Earnings announcement, Market reaction

In October 1974, the Financial Accounting Standards Board issued FASB Statement No. 2, Accounting for Research and Development Costs (henceforth FAS2). The essence of the mandated accounting treatment is stated in paragraph 12 of the Statement: All research and development [R&D] costs encompassed by this Statement shall be charged to expense when incurred. This accounting treatment was contrary to the practice followed by many firms which capitalized and amortized R&D costs. The Board's definition of R&D costs is quite inclusive following, with some modifications, the commonly used interpretation by the National Science Foundation. The Board defines R&D, in paragraph 8, as follows:

Auditing, Audit fees, Big Eight, Competitiveness

Financial ratios, Bankruptcy, Corporate failure, Conditional logit model

Internal control system, Auditing, Computer controls, Free recall protocol

Inventories, LIFO, Inventories orders, Tax liabilities

Gary C. Biddle, [Discussion of Accounting Methods and Management Decisions: The Case of Inventory Costing and Inventory Policy]: A Reply, Journal of Accounting Research, Vol. 18, Studies on Economic Consequences of Financial and Managerial Accounting: Effects on Corporate Incentives and Decisions (1980), pp. 292-295

Disclosures, Line-of-business reporting, Segment reporting, Portfolio returns