Pharmagen Pharmaceutical Research and Development Funding: Accounting Assignment

Summary

Pharmaceutical research and development funding is accounted for in specific ways. Students will learn about the accounting treatments for R&D arrangements in the pharmaceutical industry.

Liability for future royalties

Future royalties owed to a private equity investor are considered. Whether a liability should be recorded is discussed. The likelihood of the R&D project's success is considered.

Accounting for R&D costs

The accounting standards for R&D costs are explained. The costs incurred in R&D activities are considered. Alternative accounting treatments are discussed.

Accounting standards and treatments

The relevant accounting standards are identified. The application of these standards to the given R&D arrangement is explained. The benefits of the recommended accounting treatment are outlined.

Exhibit

Examples of R&D activities are given. The distinction between research and development components of R&D is explained.

Key terms

Research & Development

The process of discovering new knowledge and translating it into a plan or design.

Liability

An obligation to repay funds regardless of the outcome of the R&D.

Royalties

Payments made to the private equity investor based on future revenues.

Accounting Standards Codification

The set of standards that provide guidance for accounting for R&D arrangements.

SFAS 2

A standard that requires R&D costs to be expensed as incurred.

Contingency

An amount set aside for possible future events that are not certain.

Questions this document helps with

• How should future royalties be accounted for?
• What are the accounting treatments for R&D costs?
• What are the benefits of the recommended accounting treatment?

Summary written with AI from the document's text.