# ASC 730-10-05: Research and Development — Overall — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/730/10/#05-overview-and-background)

Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.

Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure.

Source downloaded (UTC): 2026-09-10T01:14:31.854Z to 2026-09-10T01:14:31.854Z

Record version: sha256:e3d73b3bb6642fea2c4d03651d6ac94a51741cc1ff7d2d2856f2be7aadb4b628

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 730-10-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/730/10/#05-overview-and-background)

SEC content: no

##### [730-10-05-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-05-1)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:14:31.854Z to 2026-09-10T01:14:31.854Z

Record version: sha256:98685aad924067ccab721344a51057f80e6471ffb8e967f2e8c9662ec2a095ba

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The Research and Development Topic establishes standards of financial accounting and reporting for [research and development](https://asc.understandingaccounting.org/glossary/r/#research-and-development "Research is planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service (referred to as product) or a new process or technique (referred to as process) or in bringing about a significant improvement to an existing product or process. Development is the translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or use. It includes the conceptual formulation, design, and testing of product alternatives, construction of prototypes, and operation of pilot plants.") costs. The Overall Subtopic specifies:

1.  a
    
    Those activities that shall be identified as research and development for financial accounting and reporting purposes
    
2.  b
    
    The elements of costs that shall be identified with research and development activities
    
3.  c
    
    The accounting for research and development costs
    
4.  d
    
    The financial statement disclosures related to research and development costs.

##### [730-10-05-2](https://asc.understandingaccounting.org/asc/730/10/#730-10-05-2)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:14:31.854Z to 2026-09-10T01:14:31.854Z

Record version: sha256:1021e847fa2de4bcb0f0c91640b1c4407bb64f496139d045abf66f463cf21167

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


At the time most research and development costs are incurred, the future benefits are at best uncertain. In other words, there is no indication that an economic resource has been created. Moreover, even if at some point in the progress of an individual research and development project the expectation of future benefits becomes sufficiently high to indicate that an economic resource has been created, the question remains whether that resource should be recognized as an asset for financial accounting purposes. Although future benefits from a particular research and development project may be foreseen, they generally cannot be measured with a reasonable degree of certainty. There is normally little, if any, direct relationship between the amount of current research and development expenditures and the amount of resultant future benefits to the entity. Research and development costs therefore fail to satisfy the suggested measurability test for accounting recognition as an asset.

##### [730-10-05-3](https://asc.understandingaccounting.org/asc/730/10/#730-10-05-3)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:14:31.854Z to 2026-09-10T01:14:31.854Z

Record version: sha256:c755d761548d5f71cfe2df19e1c68fd58f10743a58d49e0355eae225e8d3230b

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Also, there is often a high degree of uncertainty about whether research and development expenditures will provide any future benefits. Thus, even an indirect cause and effect relationship can seldom be demonstrated. Because there is generally no direct or even indirect basis for relating costs to revenues, the principles of associating cause and effect and systematic and rational allocation cannot be applied to recognize research and development costs as expenses. That is, the notion of matching, when used to refer to the process of recognizing costs as expenses on any sort of cause and effect basis, cannot be applied to research and development costs. The general lack of discernible future benefits at the time the costs are incurred indicates that the immediate recognition principle of expense recognition should apply.