Accounting for Acquired In-Process R&D under SFAS 141(R)

Nancy W. Goble, CPA, and Mark Riley, CPA, and Pamela A. Smith, CPA

Statement of Financial Accounting Standards (SFAS) 141(R) made significant changes to the accounting for business combinations. Among the most significant departures from prior practice are the new rules covering the accounting and financial reporting of in-process research and development (IPRD) acquired in a business combination. It is important that CPAs (in public practice or industry) who are associated with acquisitive companies understand the treatment of IPRD under the new standard. The application of SFAS 141(R) reaches beyond acquisitive companies, because this standard also applies to “fresh start” accounting for entities emerging from Chapter 11 bankruptcy.