A company spends money researching a new idea, and believes it has come up with something that has significant future economic benefit. The valuation method that will be used for this research idea under GAAP, is
A) Nonrecognition
B) Statutory value
C) Fair value
D) Historical cost

Question

Quizplus · Accepted Answer

Under GAAP, research and development costs are expensed as incurred, which means they are not capitalized on the balance sheet but are recognized as expenses in the period they are incurred. This approach is known as nonrecognition for the purposes of capitalization of the research idea.

A Company Spends Money Researching a New Idea, and Believes