August 1999

Will Not Pursue R&D Accounting Treatment

The Financial Accounting Standards Board recently announced that it would postpone its consideration of the accounting treatment for costs associated with purchased in-process research and development, or R&D. Current accounting treatment, which allows companies to write off purchased R&D immediately in an acquisition, would remain the same.

The board had tentatively decided earlier this year to require companies to capitalize purchased research and development cost and amortize that amount over its useful life.

"As with every issue the board examines, we continue our in-depth research on the subject until we are satisfied that we have looked at all aspects of the issue," FASB Chair Edmund L. Jenkins said. "During our research and deliberations on this issue--which included extensive discussions with constituents--we concluded that it was not possible to address purchased R&D costs separately from other R&D costs."

Jenkins further explained that FASB likely will consider R&D in its entirety at a future date when the board has additional resources to commit to studying the issues in greater detail.

"Considering R&D issues in a more comprehensive way will give investors better, more consistent, and complete information about R&D costs," Jenkins said. "In the meantime, however, we will continue to look at other business combinations issues including the pooling of interests and purchase methods of accounting and goodwill. We expect to have a proposal for public comment on those issues in the near future."