Statement of Financial Accounting Standards No. 2

Statement of Financial Accounting Standards No. 2 FAS2 Status Page FAS2 Summary Accounting for Research and Development Costs October 1974 Financial Accounting Standards Board of the Financial Accounting Foundation 401 MERRITT 7, P.O. BOX 5116, NORWALK, CONNECTICUT 06856-5116 Copyright © 1974 by Financial Accounting Standards Board. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Standards Board. Page 2 Statement of Financial Accounting Standards No. 2 Accounting for Research and Development Costs October 1974 CONTENTS Paragraph Numbers Introduction ................................................................................................................. 1– 6 Standards of Financial Accounting and Reporting: Activities Constituting

Research and Development............................................. 7–10 Elements of Costs to Be Identified with Research and Development Activities ................................................................................................................ 11 Accounting for Research and Development Costs................................................... 12 Disclosure........................................................................................................... 13–14 Effective Date and Transition............................................................................. 15–16 Appendix A: Background Information.................................................................... 17–22 Appendix B: Basis for Conclusions ........................................................................ 23–64 Page 3 Copyright © 1974, Financial Accounting Standards Board Not for redistribution FAS 2: Accounting for Research and Development Costs INTRODUCTION 1. This Statement establishes standards of financial accounting and reporting for research and development costs with the objectives of reducing the number of alternative accounting and reporting practices presently followed and providing useful financial information about research and development costs. This Statement specifies: a. Those activities that shall be identified as research and development for financial accounting and reporting purposes. b. The elements of costs that shall be identified with research and development activities. c. The accounting for research and development costs. d. The financial statement disclosures related to research and development costs. 2. Accounting for the costs of research and development activities conducted for others under a contractual arrangement is a part of accounting for contracts in general and is beyond the scope of this Statement. Indirect costs that are specifically reimbursable under the terms of a contract are also excluded from this Statement. 3. This Statement does not apply to activities that are unique to enterprises in the extractive industries, such as prospecting, acquisition of mineral rights, exploration, drilling, mining, and related mineral development. It does apply, however, to research and development activities of enterprises in the extractive industries that are comparable in nature to research and development activities of other enterprises, such as development or improvement of processes and techniques including those employed in exploration, drilling, and extraction. 4. APB Opinion No. 17, "Intangible Assets," is hereby amended to exclude from its scope those research and development costs encompassed by this Statement. 5. Paragraph 13 of APB Opinion No. 22, "Disclosure of Accounting Policies," is amended to delete "research and development costs (including basis for amortization)" as an example of disclosure "commonly required" with respect to accounting policies. 6. Standards of financial accounting and reporting for research and development costs are set Page 4 Copyright © 1974, Financial Accounting Standards Board Not for redistribution forth in paragraphs 7-16. The basis for the Board's conclusions, as well as alternatives considered by the Board and reasons for their rejection, are discussed in Appendix B to...

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