In the United States, generally accepted accounting principles require that research and development expenditures be charged against income in the periods in which they are incurred. Application of this principle:
A) Is required for internal financial reporting.
B) Is essential to the appropriate evaluation of investment center performance.
C) Can be the cause of the congruence problem.
D) Is critical to the appropriate measurement of return on investment.

Question

Quizplus · Accepted Answer

Research and development expenditures being charged against income as they are incurred can lead to the congruence problem, where the financial performance measures (like income) do not fully align with the long-term value creation or strategic objectives of the organization. This is because expensing R&D costs immediately can depress current period earnings, even though these expenditures are likely to generate benefits in future periods.

In the United States, Generally Accepted Accounting Principles Require That