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U.S. GAAP
Financial Accounting Review

Section 7520: Research and Development Arrangements

[U.S. GAAP Codification Topic]
730-20 Research and development arrangements

[U.S. GAAP before the Codification]
SFAS 68, October 1982, Research and Development Arrangements

1. Research and development arrangements
Research and development is funded by other parties

2. Forms of research and development arrangements
(1) Liability to repay to other parties
(2) Obligation to perform contractual services
(3) Loan to other parties
(4) Issuance of warrants

3. Liability to repay to other parties
(1) If repayment is required regardless of the result of R&D activities
--> recognize it as a liability
(2) R&D costs are expensed as incurred

4. Obligation to perform contractual services
(1) If repayment of loan depends on the result of R&D activities
--> this obligation is a contract to perform R&D for others
(2) Apply accounting for contract revenue and costs

5. Loan to other parties
If repayment of loan depends on the result of R&D activities
--> the loan is charged to R&D expenses

6. Issuance of warrants
If warrants are issued by R&D arrangement
--> the fair value of the instrument is
--> reported as paid-in capital