A company incurs research and development costs of $200,000 in 2011 of which $50,000 of these costs relate to development activities because certain criteria have been met which suggest that an intangible asset has been created. As a result of research and development costs, what is the difference in income between reporting using U.S. GAAP and IFRS in 2011?

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Quizplus · Accepted Answer

Under U.S. GAAP, all research and development costs are expensed as incurred, so the entire $200,000 would be expensed. Under IFRS, development costs can be capitalized if certain criteria are met, so $50,000 would be capitalized, resulting in $150,000 being expensed. Therefore, U.S. GAAP income is $50,000 lower than IFRS income.

A Company Incurs Research and Development Costs of $200,000 in 2011