Date of Award
6-1-1970
Document Type
Thesis
Degree Name
Master of Science (MS)
Department
Accountancy
Abstract
The expenditures for industrial research and development by companies have increased significantly in recent years and this has had a dramatic impact upon the reported financial position and results of operations of those companies engaged in substantial research and development programs. It was determined that the majority of companies treat research and development costs as a current expense which in many instances does not adhere to sound accounting theory. The companies justified using the current expense method in accounting for research and development expenditures because of conservatism, expediency, the uncertainty of future benefits, and the acceptability by the Internal Revenue Service. The current expensing of research and development costs creates a problem in that it does not, in most cases, properly match related revenues. In order to alleviate this problem, alternative accounting procedures which would more properly match expenses with revenues were investigated and discussed. The alternative accounting procedures discussed were the accrual and the deferral method. The accrual accounting method was determined to be unsatisfactory as it was not very objective and it tended to artificially level-out the reported net income over a period of years. The deferral method was the most satisfactory accounting method to use when current outlays for research and development were expected to benefit future accounting periods. It was concluded that more companies should defer and amortize their research and development costs in order to properly match revenues with expenses.
Recommended Citation
Ellis, Cecil B., "Accounting treatment of research and development costs" (1970). Theses and Dissertations. 7906.
https://commons.und.edu/theses/7906