[Anonymous]

Brill Co. made the following expenditures during the current year:

Costs to develop computer software for use in

Costs to develop computer software for use in

Brill’s general management information system

$100,000

Costs of market research activities

75,000

What amount of these expenditures should Brill report in its current year income statement as research and development expenses under U.S. GAAP?

TO MY UNDERSTANDING, 75,000 should be capitalized, but why should the 100,000 be capitalized also? plz enlighten me!

[Anonymous]

This software is for internal use, unrelated to production and is not considered research and development. Market research is also not research and development because it is not aimed at discovery of new knowledge to develop a new product or service. (Becker Answer)

In other words, Marketing Research activities are never capitalized and never considered R&D Expense…it's just a separate expense all together.

The $100,000 could be capitalized or not. The question does not provide enough information to make that conclusion. But, you can conclude that it is NOT an R&D Expense because the development of the software is NOT related to producing a new PRODUCT OR enhancing an existing PRODUCT…it's just being developed to improve a Management Information System (an MIS doesn't produce products).

I'm studying FAR too, and it is a BEAST!

Hope that Helps!

[Anonymous]

thanks byrum. that helps! i agree that the 100,000 is really iffy. how's your study going? let's work hard!!

[Author]

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