# ASC Topic 730: Research and Development Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/730/) 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): 2026-09-10T01:14:28.594Z to 2026-09-10T01:16:08.583Z Record version: sha256:b06b3a94307a8e0f26b7a4177dd065f4b9bbfd22a6003593c9dc902cb85c966e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 730 identifies which activities and cost elements constitute research and development and requires that R&D costs within its scope be charged to expense when incurred (730-10-25-1), because the future benefits are too uncertain to justify capitalization (730-10-05-2 through 05-3). Subtopic 730-10 supplies the definitions, cost elements (including the "alternative future use" test for materials, equipment, facilities, and purchased intangibles), scope exclusions (contract R&D for others, extractive industries, routine alterations, market research, and R&D assets acquired in a business combination, NFP acquisition, or JV formation), and the requirement to disclose total R&D expense for each income statement period (730-10-50-1). The remaining subtopics address special settings: 730-20 looks to the substance of externally funded R&D arrangements (contract to perform R&D for others versus an in-substance liability to repay the funding parties) and imposes disclosure of significant agreement terms; 730-912 lets federal government contractors in best-efforts cost-sharing arrangements meeting all six conditions of 730-912-15-2 expense costs as R&D and record customer funding as an offset to aggregate R&D expense rather than revenue; and 730-985 is purely a cross-reference to the software guidance in 985-20. The unifying idea is immediate expense recognition, with substance-over-form governing how funding and arrangements are characterized. Source downloaded (UTC): 2026-09-10T01:14:28.594Z to 2026-09-10T01:14:54.866Z Record version: sha256:88e67d58b017bd5bb9f03259be2453697aa2ac4010a0900309090797f3062bd1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10: Research and Development — Overall ### Machine-generated study aids ```json { "summary": "ASC 730-10 governs the identification and accounting for research and development (R&D) costs. The core rule is that R&D costs within scope are charged to expense when incurred (730-10-25-1), because future benefits are too uncertain and unmeasurable to support asset recognition (730-10-05-2 through 05-3). The subtopic also defines which activities count as R&D, which cost elements are R&D costs, and requires disclosure of total R&D expense for each income statement period.", "key_points": [ "R&D costs within the scope of this Subtopic shall be charged to expense when incurred (730-10-25-1); the immediate recognition principle applies because matching cannot be applied to R&D (730-10-05-3).", "Materials, equipment, facilities, and intangibles purchased from others that have alternative future uses are capitalized, with consumption/depreciation/amortization charged to R&D; if there is no alternative future use, the full cost is R&D expense when incurred (730-10-25-2(a) and (c)).", "R&D costs also include personnel salaries and wages, contract services performed by others on the entity's behalf, and a reasonable allocation of indirect costs, but not general and administrative costs not clearly related to R&D (730-10-25-2(b), (d), (e)).", "The alternative future use test does not apply to internally developed software used in R&D activities — those costs are expensed as incurred (730-10-25-4); purchased or leased software for R&D is expensed unless it has alternative future uses (730-10-25-3).", "Excluded from scope: R&D performed for others under contract, activities unique to extractive industries, processes for selling or administrative use, routine or periodic alterations to existing products, market research or testing, and R&D assets acquired in a business combination, an acquisition by an NFP, or recognized by a joint venture upon formation (730-10-15-4).", "R&D assets acquired in a business combination (or NFP acquisition or JV formation) are recognized and measured at fair value under Subtopic 805-20 regardless of alternative future use, then accounted for by nature (tangible) or under Topic 350 (intangible) (730-10-15-4(f)).", "Total R&D costs charged to expense must be disclosed for each period an income statement is presented, including R&D for computer software products to be sold, leased, or otherwise marketed (730-10-50-1)." ], "categories": [ "Recognition", "Intangibles and goodwill", "Disclosure", "Inventory and PP&E" ], "audience_level": "introductory", "student_note": "The bright-line rule to memorize is immediate expensing, and the most-tested nuance is the \"alternative future use\" test: equipment or purchased intangibles usable elsewhere are capitalized and only the depreciation/amortization is R&D expense. Students commonly miss that this test never applies to internally developed software used in R&D (always expensed) and that IPR&D acquired in a business combination is capitalized at fair value under 805-20 regardless of alternative future use.", "related_topics": [ "730-20", "350-40", "350-50", "985-20", "805-20", "340-10" ], "key_concepts": [ "research and development costs", "expense as incurred", "alternative future use", "indirect cost allocation", "in-process research and development", "internally developed software", "contract r&d services", "pilot plant" ] } ``` Source downloaded (UTC): 2026-09-10T01:14:28.594Z to 2026-09-10T01:14:28.594Z Record version: sha256:9bd5975dc419c28e1feab9115357445b23cb7c9128c25a663496c09db310dbdd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/730/10/#00-status) SEC content: no ##### [730-10-00-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:28.594Z to 2026-09-10T01:14:28.594Z Record version: sha256:d9273cacabc366870f2b4217d77c1ac9f14a3e186634cdcc55f67d986e78c241 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
AcquirerAmendedAccounting Standards Update No. 2025-0305/12/2025
Acquisition by a Not-for-Profit EntityAddedAccounting Standards Update No. 2010-0701/28/2010
BusinessAmendedAccounting Standards Update No. 2017-0101/05/2017
Corporate Joint VentureAddedAccounting Standards Update No. 2023-0508/23/2023
Joint VentureAddedAccounting Standards Update No. 2023-0508/23/2023
Variable Interest EntitySupersededAccounting Standards Update No. 2025-0305/12/2025
730-10-15-4AmendedAccounting Standards Update No. 2023-0508/23/2023
730-10-15-4AmendedAccounting Standards Update No. 2010-0701/28/2010
730-10-25-1AmendedAccounting Standards Update No. 2023-0508/23/2023
730-10-25-1AmendedAccounting Standards Update No. 2010-0701/28/2010
730-10-25-2AmendedAccounting Standards Update No. 2025-0609/18/2025
730-10-25-4AmendedAccounting Standards Update No. 2025-0609/18/2025
730-10-55-1AmendedAccounting Standards Update No. 2012-0410/01/2012
730-10-60-2ASupersededAccounting Standards Update No. 2025-0609/18/2025
730-10-60-5AmendedAccounting Standards Update No. 2014-0905/28/2014
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. Source downloaded (UTC): 2026-09-10T01:14:35.682Z to 2026-09-10T01:14:35.682Z Record version: sha256:2e72d3127c47d167f0a16d10a36f16260e0cebfaa019f223aa381104321ccfcd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-10: 10 Objectives [Read section](https://asc.understandingaccounting.org/asc/730/10/#10-objectives) SEC content: no ##### [730-10-10-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-10-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:35.682Z to 2026-09-10T01:14:35.682Z Record version: sha256:247791326f060e95f04f19b6cd7c256b93d65da7f6c5ad286bc60b5f4e29a266 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The objective of this Subtopic is to provide guidance related to [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. Source downloaded (UTC): 2026-09-10T01:14:37.494Z to 2026-09-10T01:14:37.494Z Record version: sha256:8eed5e9cfa8a819dee033f547b163e05f6df3bb583cf19327ddb683c35c54899 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/730/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [730-10-15-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:37.494Z to 2026-09-10T01:14:37.494Z Record version: sha256:8bc64dc83cfaef123c585cb2d5eaf4aae9716b641c5b508114bc68d519b3d0fb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Scope Section of the Overall Subtopic establishes the pervasive scope for all Subtopics of the Research and Development Topic. Unless explicitly addressed within specific Subtopics, the following scope guidance applies to all Subtopics of the Research and Development Topic. #### Entities ##### [730-10-15-2](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:37.494Z to 2026-09-10T01:14:37.494Z Record version: sha256:e4431089f9a7a5bd44d6cb90818a37c3dfdded8f37811c5a1d4e6b91fb8be09d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Research and Development Topic applies to all entities, including the following: 1. a Entities in the extractive industries whose [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.") activities are comparable in nature to research and development activities of other entities, such as development or improvement of processes and techniques including those employed in exploration, drilling, and extraction. #### Transactions ##### [730-10-15-3](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:37.494Z to 2026-09-10T01:14:37.494Z Record version: sha256:a96072efe03108c70990a72a9b42cc48174f9968634372d17daad240e4ec44a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Research and Development Topic applies to the following transactions and activities: 1. a Those activities aimed at developing or significantly improving a product or service (referred to as product) or a process or technique (referred to as process) whether the product or process is intended for sale or use. A process may be a system whose output is to be sold, leased, or otherwise marketed to others. A process also may be used internally as a part of a manufacturing activity or a service activity where the service itself is marketed. ##### [730-10-15-4](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:37.494Z to 2026-09-10T01:14:37.494Z Record version: sha256:9b87b5b5cf9b440d45f3444100f4099d1a1053d23cb99129d129a1e8f9344e21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Topic does not apply to the following transactions and activities: 1. a Accounting for the costs of research and development activities conducted for others under a contractual arrangement, which is a part of accounting for contracts in general. Indirect costs, including indirect costs that are specifically reimbursable under the terms of a contract, are also excluded from the scope of this Topic. 2. b Activities that are unique to entities in the extractive industries, such as prospecting, acquisition of mineral rights, exploration, drilling, mining, and related mineral development. 3. c The acquisition, development, or improvement of a process by an entity for use in its selling or administrative activities. A process may be intended to achieve cost reductions as opposed to revenue generation. However, (e) specifically excludes market research or market testing activities from research and development activities. Those activities were excluded because they relate to the selling function of an entity. Thus, while in the broadest sense of the word, a process may be used in all of an entity's activities, the acquisition, development, or improvement of a process by an entity for use in its selling or administrative activities shall be excluded from the definition of research and development activities. To the extent, therefore, that the acquisition, development, or improvement of a process by an entity for use in its selling or administrative activities includes costs for computer software, those costs are not research and development costs. Examples of the excluded costs of software are those incurred for development by an airline of a computerized reservation system or for development of a general management information system. See Subtopic 350-40 for guidance related to costs of computer software developed or obtained for internal use and Subtopic 985-20 for computer software intended to be sold, leased, or marketed. 4. d Routine or periodic alterations to existing products, production lines, manufacturing processes, and other ongoing operations even though those alterations may represent improvements. 5. e Market research or market testing activities. 6. f Research and development assets acquired in a business combination, acquired in an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities."), or recognized by a [joint venture](https://asc.understandingaccounting.org/glossary/j/#joint-venture "An entity owned and operated by a small group of businesses (the joint venturers) as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a joint venture frequently is to share risks and rewards in developing a new market, product, or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity that is a subsidiary of one of the joint venturers is not a joint venture. The ownership of a joint venture seldom changes, and its equity interests usually are not traded publicly. A minority public ownership, however, does not preclude an entity from being a joint venture. As distinguished from a corporate joint venture, a joint venture is not limited to corporate entities.") upon formation. If tangible and intangible assets acquired in that manner are used in research and development activities, they are recognized and measured at fair value in accordance with Subtopic 805-20, regardless of whether they have an alternative future use. After recognition, tangible assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation that are used in research and development activities are accounted for in accordance with their nature. After recognition, intangible assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation that are used in research and development activities are accounted for in accordance with Topic 350. ##### [730-10-15-5](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:37.494Z to 2026-09-10T01:14:37.494Z Record version: sha256:f05bad210e030e14bfd9dd2cb5f18932a060a23b3e5b3452e542c88154eb087e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Topic may or may not apply to the following transactions and activities: 1. a Development of computer software internally for its own use. If development of computer software is undertaken for the entity's own use, the software may be intended, for example, to be used in the research and development activities of the entity or as a part of a newly developed or significantly improved product or process. See Subtopic 350-40 for guidance related to costs of computer software developed or obtained for internal use. 2. b Costs incurred to purchase or lease computer software developed by others are not research and development costs under this Subtopic unless the software is for use in research and development activities. See also paragraph [985-20-25-1](https://asc.understandingaccounting.org/asc/985/20/#985-20-25-1). Source downloaded (UTC): 2026-09-10T01:14:44.016Z to 2026-09-10T01:14:44.016Z Record version: sha256:c63629f26d39fed5657181e0cefe0278fdad6e2aa979c46cbc4e81672a88eaeb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/730/10/#25-recognition) SEC content: no #### Accounting for Research and Development Costs ##### [730-10-25-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:44.016Z to 2026-09-10T01:14:44.016Z Record version: sha256:938c6a2fd3534de1e347f501269af5d1d320c6eed82218f3b516af598e78ec7e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [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 encompassed by this Subtopic shall be charged to expense when incurred. As noted in paragraph [730-10-15-4(f)](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-4), this Topic does not apply to tangible and intangible assets acquired in a business combination, acquired in an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities."), or recognized by a [joint venture](https://asc.understandingaccounting.org/glossary/j/#joint-venture "An entity owned and operated by a small group of businesses (the joint venturers) as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a joint venture frequently is to share risks and rewards in developing a new market, product, or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity that is a subsidiary of one of the joint venturers is not a joint venture. The ownership of a joint venture seldom changes, and its equity interests usually are not traded publicly. A minority public ownership, however, does not preclude an entity from being a joint venture. As distinguished from a corporate joint venture, a joint venture is not limited to corporate entities.") upon formation that are used in research and development activities. #### Elements of Costs to Be Identified with Research and Development Activities ##### [730-10-25-2](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-2) Pending content: yes Source downloaded (UTC): 2026-09-10T01:14:44.016Z to 2026-09-10T01:14:44.016Z Record version: sha256:686649af889077c8d6cfcc2ab3dcaa4306474f431c6cc8c89e3c18c94b579227 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Elements of costs shall be identified with research and development activities as follows (see Subtopic 350-50 for guidance related to website development): 1. a Materials, equipment, and facilities. The costs of materials (whether from the entity's normal inventory or acquired specially for research and development activities) and equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses (in research and development projects or otherwise) shall be capitalized as tangible assets when acquired or constructed. The cost of such materials consumed in research and development activities and the depreciation of such equipment or facilities used in those activities are research and development costs. However, the costs of materials, equipment, or facilities that are acquired or constructed for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are research and development costs at the time the costs are incurred. See Topic 360 for guidance related to property, plant, and equipment; the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 for guidance related to impairment and disposal; and paragraphs [360-10-35-2 through 35-6](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-2) for guidance related to depreciation. 2. b Personnel. Salaries, wages, and other related costs of personnel engaged in research and development activities shall be included in research and development costs. 3. c Intangible assets purchased from others. The costs of intangible assets that are purchased from others for use in research and development activities and that have alternative future uses (in research and development projects or otherwise) shall be accounted for in accordance with Topic 350. The amortization of those intangible assets used in research and development activities is a research and development cost. However, the costs of intangibles that are purchased from others for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are research and development costs at the time the costs are incurred. 4. d Contract services. The costs of services performed by others in connection with the research and development activities of an entity, including research and development conducted by others in behalf of the entity, shall be included in research and development costs. 5. e Indirect costs. Research and development costs shall include a reasonable allocation of indirect costs. However, general and administrative costs that are not clearly related to research and development activities shall not be included as research and development costs. Transition date:(P) December 16, 2027; (N) December 16, 2027Transition guidance: [350-40-65-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-65-4)Elements of costs shall be identified with research and development activities as follows: 1. a Materials, equipment, and facilities. The costs of materials (whether from the entity's normal inventory or acquired specially for research and development activities) and equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses (in research and development projects or otherwise) shall be capitalized as tangible assets when acquired or constructed. The cost of such materials consumed in research and development activities and the depreciation of such equipment or facilities used in those activities are research and development costs. However, the costs of materials, equipment, or facilities that are acquired or constructed for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are research and development costs at the time the costs are incurred. See Topic 360 for guidance related to property, plant, and equipment; the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 for guidance related to impairment and disposal; and paragraphs [360-10-35-2 through 35-6](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-2) for guidance related to depreciation. 2. b Personnel. Salaries, wages, and other related costs of personnel engaged in research and development activities shall be included in research and development costs. 3. c Intangible assets purchased from others. The costs of intangible assets that are purchased from others for use in research and development activities and that have alternative future uses (in research and development projects or otherwise) shall be accounted for in accordance with Topic 350. The amortization of those intangible assets used in research and development activities is a research and development cost. However, the costs of intangibles that are purchased from others for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are research and development costs at the time the costs are incurred. 4. d Contract services. The costs of services performed by others in connection with the research and development activities of an entity, including research and development conducted by others in behalf of the entity, shall be included in research and development costs. 5. e Indirect costs. Research and development costs shall include a reasonable allocation of indirect costs. However, general and administrative costs that are not clearly related to research and development activities shall not be included as research and development costs. #### Computer Software ##### [730-10-25-3](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:44.016Z to 2026-09-10T01:14:44.016Z Record version: sha256:0660274dacdab4fb8bf631ea90a7f70f3d80a127b9da72795efa1abdf1d21048 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When software for use in research and development activities is purchased or leased, its cost shall be accounted for as specified by (c) in the preceding paragraph and paragraph [730-10-25-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-1). That is, the cost shall be charged to expense as incurred unless the software has alternative future uses (in research and development or otherwise). ##### [730-10-25-4](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-4) Pending content: yes Source downloaded (UTC): 2026-09-10T01:14:44.016Z to 2026-09-10T01:14:44.016Z Record version: sha256:e858691eb430cec904e4407a903142ac1a865965996915d792bf9224a4ae6b86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Development of software to be used in research and development activities includes costs incurred by an entity in developing computer software internally for use in its research and development activities, are research and development costs and, therefore, shall be charged to expense when incurred. The alternative future use test does not apply to the internal development of computer software; paragraph [730-10-25-2(c)](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-2) applies only to intangibles purchased from others. This includes costs incurred during all phases of software development because all of those costs are incurred in a research and development activity. Transition date:(P) December 16, 2027; (N) December 16, 2027Transition guidance: [350-40-65-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-65-4)Development of software to be used in research and development activities, including costs incurred by an entity in developing computer software internally for use in its research and development activities, are research and development costs and, therefore, shall be charged to expense when incurred. The alternative future use test does not apply to the internal development of computer software; paragraph [730-10-25-2(c)](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-2) applies only to intangibles purchased from others. Source downloaded (UTC): 2026-09-10T01:14:45.691Z to 2026-09-10T01:14:45.691Z Record version: sha256:fed9cdb4bc5d5bc2f52b44b151dbc2798c05cda8a8a0610352394e7989a6da67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/730/10/#50-disclosure) SEC content: no ##### [730-10-50-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:45.691Z to 2026-09-10T01:14:45.691Z Record version: sha256:6a3a80fd339d7e9fe618e020e9279b221e34ec23da6c01292520a625bbc2bbae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Disclosure shall be made in the financial statements of the total [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 charged to expense in each period for which an income statement is presented. Such disclosure shall include research and development costs incurred for a computer software product to be sold, leased, or otherwise marketed. Source downloaded (UTC): 2026-09-10T01:14:48.408Z to 2026-09-10T01:14:48.408Z Record version: sha256:481d3f9ea0ea3497fd63101f04ae7289904833cc791ece46421cc12e14485851 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/730/10/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [730-10-55-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:48.408Z to 2026-09-10T01:14:48.408Z Record version: sha256:6ce13c23a1f3ee0797ce494363161168770fe0dd541a2c07c5b29569b0553589 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following activities typically would be considered [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.") within the scope of this Topic (unless conducted for others under a contractual arrangement—see paragraph [730-10-15-4\[a\]](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-4)): 1. a Laboratory research aimed at discovery of new knowledge 2. b Searching for applications of new research findings or other knowledge 3. c Conceptual formulation and design of possible product or process alternatives 4. d Testing in search for or evaluation of product or process alternatives 5. e Modification of the formulation or design of a product or process 6. f Design, construction, and testing of preproduction prototypes and models 7. g Design of tools, jigs, molds, and dies involving new technology 8. h Design, construction, and operation of a pilot plant that is not of a scale economically feasible to the entity for commercial production 9. i Engineering activity required to advance the design of a product to the point that it meets specific functional and economic requirements and is ready for manufacture 10. j Design and development of tools used to facilitate research and development or components of a product or process that are undergoing research and development activities. ##### [730-10-55-2](https://asc.understandingaccounting.org/asc/730/10/#730-10-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:48.408Z to 2026-09-10T01:14:48.408Z Record version: sha256:967e9e794ae657b5a690bc59a79160e350b992269a3f9124eac4eddfa6166776 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following activities typically would not be considered research and development within the scope of this Topic: 1. a Engineering follow-through in an early phase of commercial production 2. b Quality control during commercial production including routine testing of products 3. c Trouble-shooting in connection with break-downs during commercial production 4. d Routine, ongoing efforts to refine, enrich, or otherwise improve upon the qualities of an existing product 5. e Adaptation of an existing capability to a particular requirement or customer's need as part of a continuing commercial activity 6. f Seasonal or other periodic design changes to existing products 7. g Routine design of tools, jigs, molds, and dies 8. h Activity, including design and construction engineering, related to the construction, relocation, rearrangement, or start-up of facilities or equipment other than the following: 1. 1 Pilot plants (see \[h\] in the preceding paragraph) 2. 2 Facilities or equipment whose sole use is for a particular research and development project (see paragraph [730-10-25-2\[a\]](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-2)). 9. i Legal work in connection with patent applications or litigation, and the sale or licensing of patents. ##### [730-10-55-3](https://asc.understandingaccounting.org/asc/730/10/#730-10-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:48.408Z to 2026-09-10T01:14:48.408Z Record version: sha256:083c795f86ea72c2fd2bb0dabf2c6e5ebfd588e9d71218fb82bd3052ce0b164b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Nonrefundable advance payments for future research and development activities for materials, equipment, facilities, and purchased intangible assets that have an alternative future use (in research and development projects or otherwise) are within the scope of this Subtopic. Subtopic 730-20 provides guidance on accounting for nonrefundable advance payments for goods or services that have the characteristics that will be used or rendered for future research and development activities pursuant to an executory contractual arrangement. Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:5dfc4574c15c4f460c30352ebd6549baf7fe97d63946c14bdadf0bacca173b96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-10-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/730/10/#60-relationships) SEC content: no #### Other Assets and Deferred Costs ##### [730-10-60-1](https://asc.understandingaccounting.org/asc/730/10/#730-10-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:625d0bd1fc36d07ebf377ce2bd9c0d4cd5c2a493f3c5b914fef1054d0bc2dd29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance regarding design and development costs for products to be sold under long-term supply arrangements, see Subtopic 340-10. #### Intangibles—Goodwill and Other ##### [730-10-60-2](https://asc.understandingaccounting.org/asc/730/10/#730-10-60-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:859a92cca66725830644c47f629e4eb19cc58d68e5758c1af5b2807a2310199d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance related to the costs of internal-use computer software, see Subtopic 350-40. ##### [730-10-60-2A](https://asc.understandingaccounting.org/asc/730/10/#730-10-60-2A) Pending content: yes Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:be37c549df95d74cb88ae527f5cfbb406dbf38b9b828be13b1af08cabe71e25f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance related to website development costs, see Subtopic 350-50. Transition date:(P) December 16, 2027; (N) December 16, 2027Transition guidance: [350-40-65-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-65-4)[Paragraph superseded by Accounting Standards Update No. 2025-06.](https://asc.understandingaccounting.org/updates/asu-2025-06/) ##### [730-10-60-3](https://asc.understandingaccounting.org/asc/730/10/#730-10-60-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:fb978761dc66ff58de4ebaeb72213f1e7586034a85d72c9a4e27e39e531b48d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Software ##### [730-10-60-4](https://asc.understandingaccounting.org/asc/730/10/#730-10-60-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:45df3a36784c765d75c57c6b60eb46cb3b5cc39dd1c8784dc9eae4853dc40d8d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance regarding costs incurred to establish the technological feasibility of a computer software product to be sold, leased, or otherwise marketed, see paragraph [985-20-25-1](https://asc.understandingaccounting.org/asc/985/20/#985-20-25-1). ##### [730-10-60-5](https://asc.understandingaccounting.org/asc/730/10/#730-10-60-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:51.323Z to 2026-09-10T01:14:51.323Z Record version: sha256:70066cfc6d53d41e0a9aa5bdd1f74c70f87f64f2352c571d35bc13a9d2c6892c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance related to a funded software-development arrangement, see paragraphs [730-20-15-1A](https://asc.understandingaccounting.org/asc/730/20/#730-20-15-1A) and [985-20-25-12](https://asc.understandingaccounting.org/asc/985/20/#985-20-25-12). Source downloaded (UTC): 2026-09-10T01:14:58.781Z to 2026-09-10T01:15:40.514Z Record version: sha256:e7b229dfcc9691109a0498efdc3d3e0b1b26cb5fe2619d8a7f7f90ddbaaf2ff4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20: Research and Development — Research and Development Arrangements ### Machine-generated study aids ```json { "summary": "ASC 730-20 governs how an entity accounts for arrangements in which other parties (often a limited partnership of investors) fund the entity's research and development. The central question is the substance of the entity's obligation: whether the entity has merely contracted to perform R&D services for others, or has in substance incurred a liability to repay the funding parties. Substance governs over form, so payments labeled royalties or option/purchase prices may in fact be settlement of a borrowing, the purchase price of an asset, or true royalties.", "key_points": [ "The provided text of the Subtopic describes R&D arrangements — typically limited partnerships in which the entity or a related party is general partner and performs the R&D on a best-efforts basis for a fixed fee or cost-plus fee (730-20-05-2 through 05-4).", "An entity that is party to an R&D funding arrangement usually incurs an obligation when it enters the arrangement, ranging from an obligation to perform contract R&D work to an obligation to repay the funding parties with a return (730-20-05-6).", "Accounting representations are not limited to legal requirements; future payments ostensibly for royalties or to purchase the partnership's interest may in substance be (a) settlement of a borrowing, (b) the purchase price of an asset, or (c) royalties for use of an asset (730-20-05-9).", "Financial reporting must faithfully represent the arrangement and must not subordinate substance to form (730-20-05-9).", "An entity accounting for its obligation as a contract to perform R&D for others must disclose the terms of significant agreements (royalty arrangements, purchase provisions, license agreements, and commitments to provide additional funding) as of each balance sheet date (730-20-50-1(a)).", "Such an entity must also disclose compensation earned and costs incurred under those contracts for each income statement period presented (730-20-50-1(b)); related party disclosures under Topic 850 also apply (730-20-50-2).", "Multiple arrangements need not be disclosed separately unless separate disclosure is necessary to understand the financial statement effects; aggregation of similar arrangements by type may be appropriate (730-20-50-3)." ], "categories": [ "Recognition", "Disclosure", "Contingencies and guarantees", "Consolidation" ], "audience_level": "intermediate", "student_note": "Exam questions hinge on classification: if the sponsor is in substance obligated to repay the investors, the funding is a liability (borrowing), not R&D revenue or a mere service contract. The common misunderstanding is assuming the legal form — a \"best-efforts\" R&D services contract with a partnership — controls; ASC 730-20-05-9 expressly says substance governs.", "related_topics": [ "810-30", "450-20", "850", "730-10", "606" ], "key_concepts": [ "research and development arrangement", "funded research and development", "limited partnership funding vehicle", "substance over form", "obligation to repay funding parties", "contract to perform research and development for others", "option to purchase results of r&d", "royalty and purchase provisions" ] } ``` Source downloaded (UTC): 2026-09-10T01:14:58.781Z to 2026-09-10T01:14:58.781Z Record version: sha256:bf6d955ceb9b4ee1bcb79dc0d79c1c3bcd3d36bd5f87c4740af867039407b33c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/730/20/#00-status) SEC content: no ##### [730-20-00-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:14:58.781Z to 2026-09-10T01:14:58.781Z Record version: sha256:d6763f0c0ab5a02d0dd1eaca20a9a2de65a338f87302996c4805b552805488c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
AcquirerAmendedAccounting Standards Update No. 2025-0305/12/2025
Acquisition by a Not-for-Profit EntityAddedAccounting Standards Update No. 2010-0701/28/2010
BusinessAmendedAccounting Standards Update No. 2017-0101/05/2017
Variable Interest EntitySupersededAccounting Standards Update No. 2025-0305/12/2025
730-20-05-8AmendedMaintenance Update 2014-07 (PDF)03/17/2014
730-20-15-1AAddedAccounting Standards Update No. 2014-0905/28/2014
730-20-15-4AmendedAccounting Standards Update No. 2014-0905/28/2014
730-20-25-9AmendedAccounting Standards Update No. 2010-0701/28/2010
Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:dad08fda6df2e5b5f94fff358fed8baf163477d7961a2758630917a59fc18668 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/730/20/#05-overview-and-background) SEC content: no ##### [730-20-05-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:66d22d5024d661bf2f12a9057145e670d6658703e175f3b969d8a9fa775c8751 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on [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.") arrangements. Research and development arrangements have been used to finance the research and development of a variety of new products, such as information processing systems, medical technology, experimental drugs, electronic devices, and aerospace equipment. Entities may enter into arrangements for any of the following reasons: 1. a To transfer all or part of the uncertainty and risk involved with the research and development to others 2. b To obtain the benefit of funds that are made available because of tax incentives for investors 3. c To attract qualified research and development personnel who otherwise might be concerned that funding might not be assured 4. d To avoid expanding the ownership of the entity and the impact on earnings per share (EPS) that would result from issuing equity securities 5. e To avoid debt service expenditures and the impact on the entity's debt-to-equity ratio that would result from issuing debt securities 6. f To avoid the impact on the entity's near-term earnings that would result if it incurred the related research and development expenses. ##### [730-20-05-2](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:0c1e77cfa7015f74de4153b8bfe0312b514356e51e73834ac8d421a145311c6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many arrangements are formed as limited partnerships. In some, the entity or a [related party](https://asc.understandingaccounting.org/glossary/r/#related-parties "Related parties include: Affiliates of the entity Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management Principal owners of the entity and members of their immediate families Management of the entity and members of their immediate families Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.") is the general partner who manages the research and development activities. Sometimes, the limited partners are related to the entity. In some arrangements, the entity has the basic technology needed for the research and development and has performed preliminary research and development work to determine the attractiveness of further work. The entity might contribute the preliminary research and development work and basic technology to the partnership for a minor equity interest or might license or give the rights to the preliminary work and basic technology to the partnership. ##### [730-20-05-3](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:78be32e92bf2c971fe53fded31e007716b67e5bca8d49aa61bdbca4f26280646 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The terms of the arrangement usually contemplate, but do not guarantee, that the funds provided by the limited partners will be sufficient to complete the intended research and development. However, some agreements permit or require the general partner to sell additional limited-partnership interests or to use its own funds if the funds provided are insufficient to complete the research and development effort. The entity sometimes provides additional funds through loans or advances to the partnership. Repayment of the loans or advances sometimes is guaranteed by the partnership although repayment sometimes is contingent on realization of future economic benefits of the research and development; for example, repayment might be made through offsets against the purchase price for the results of the project or against royalty payments. ##### [730-20-05-4](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:1278d58e1c7c561c2d453f1ed8d6084c41576f6247fe45992059c0cb2b9013f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity or a related party of the entity usually performs the research and development work under a contract with the partnership. The compensation under the research and development contract usually is either a fixed fee or reimbursement of direct costs plus a fixed fee or fixed percentage of those costs. The work is performed on a best-efforts basis with no guarantee of either technological or commercial success. The partnership retains legal ownership of the results of the research and development and sometimes retains legal rights to the basic technology provided by the entity. ##### [730-20-05-5](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:05a664abb424684abccfc2d2c2556e8cc9fb7c5bc415d861f93fed8b0ee45ca7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Either as part of the partnership agreement or through contracts with the partnership, the entity usually has an option either to purchase the partnership's interest in or to obtain the exclusive rights to the entire results of the research and development in return for a lump sum payment or royalty payments to the partnership. Some arrangements contain a provision that permits the entity to acquire complete ownership of the results for a specified amount of the entity's stock or cash at some future time. In some of those purchase agreements, the partnership has the option to receive either the entity's stock or cash; in others, the entity makes the decision. Sometimes, warrants or similar instruments to purchase the entity's stock are issued in connection with the arrangement. ##### [730-20-05-6](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:0193fe590930fb7f4b113326e577e8c76d9470383f4909c9d58413655ac4b5d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that is a party to an arrangement through which research and development is funded by other parties usually incurs an obligation when it enters into the arrangement. The nature and extent of the entity's obligation are sometimes difficult to determine and can range from an obligation to perform contract research and development work to an obligation to repay the other parties, with a return, for the funds provided. ##### [730-20-05-7](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:73d2239c0996a31607732035ce35734be6302970765a5b8813328a8bba4109aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the results of the research and development are determined to have sufficient future economic benefit, the entity probably will exercise its option either to purchase the partnership's interests in or to obtain the exclusive rights to the entire results. If the results do not have future economic benefit, the entity usually is not legally required to exercise its option; however, there may be valid business reasons for the entity to acquire the results even though the original objectives of the research and development are not met. For example, the entity may want to obtain ownership of results that have value to the entity even though they do not meet the original objectives. ##### [730-20-05-8](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:16139cc8000199f0ba8e773077ca1f0091dd3fbed22a90d70a07f19f93d98e29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Other reasons to acquire the results of research and development may be: 1. a To maintain the ability to enter into another arrangement with the same parties or similar arrangements with other parties 2. b To recover the ownership of or rights to the entity's basic technology or to prevent the partnership from providing that technology to others 3. c To avoid any potential future claim against the use of the results 4. d To fulfill a moral obligation (for example, the entity is the general partner and due to a conflict of interest feels compelled to exercise its option). ##### [730-20-05-9](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:09ea55200e469a5033239877417df330c13036a0828cbed9754df31685b760c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although the entity's legal liabilities will be specified in the various contracts and agreements under the arrangement, accounting representations should not necessarily be limited to legal requirements. Depending on the facts and circumstances involved in a particular research and development arrangement, future payments by the entity to the other parties ostensibly for royalties or to purchase the partnership's interests in or to obtain the exclusive rights to the research and development results might actually be any of the following: 1. a The settlement of a borrowing 2. b The purchase price of an asset 3. c The royalties for the use of an asset. The financial reporting of an entity that is a party to a research and development arrangement should represent faithfully what it purports to represent and should not subordinate substance to form. ##### [730-20-05-10](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:2c1d373670c1d868d6bdc5704296f68e8ed60099584a40add4806d069080dd2c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The legal structure of a research and development arrangement may take a variety of forms and often is influenced by federal and state income tax and securities regulations. An entity might have an equity interest in the arrangement, or its legal involvement might be only contractual (for example, a contract to provide services and an option to acquire the results of the research and development). ##### [730-20-05-11](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:00.952Z to 2026-09-10T01:15:00.952Z Record version: sha256:492aa9030ab1855f13a9c2f2466f54761142ebcc7a942adda3ffebffe5eb0537 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on consolidation of a research and development arrangement, see Subtopic 810-30. An overview can be found in Section 810-30-05. Source downloaded (UTC): 2026-09-10T01:15:04.628Z to 2026-09-10T01:15:04.628Z Record version: sha256:5105bdc6d06598dde975a05974965d592223933a3bf9554a276e052b40839b2f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-10: 10 Objectives [Read section](https://asc.understandingaccounting.org/asc/730/20/#10-objectives) SEC content: no ##### [730-20-10-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-10-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:04.628Z to 2026-09-10T01:15:04.628Z Record version: sha256:1528352fec4453720346ca8babcd37eddaafb999df4aee14d069f84c7a571f94 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The objective of this Subtopic is to provide guidance related to [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.") arrangements. Source downloaded (UTC): 2026-09-10T01:15:07.621Z to 2026-09-10T01:15:07.621Z Record version: sha256:5fdadc80f57be5d71265c4449786ab27f663250979dfbfeb375f0ef6acbd6d9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/730/20/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [730-20-15-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:07.621Z to 2026-09-10T01:15:07.621Z Record version: sha256:7894dcd158f43f4d4f48fd8ed3d72e81b1d5d77b1e868a00823d0c63104cb9bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 730-10-15, with specific qualifications and exceptions noted below. ##### [730-20-15-1A](https://asc.understandingaccounting.org/asc/730/20/#730-20-15-1A) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:07.621Z to 2026-09-10T01:15:07.621Z Record version: sha256:47410c5b42fd2d681cc943a5be7d101ad9bf97a6e9b13a2e6a0be26b1b3131aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic also applies to software-development arrangements that are fully or partially funded by a party other than the vendor that is developing the software and for which technological feasibility of the computer software product in accordance with the provisions of Subtopic 985-20 on software has not been established before entering into the arrangement. Those arrangements typically provide the funding party with some or all of the following benefits: 1. a Royalties payable to the funding party based solely on future sales of the product by the software vendor (that is, reverse royalties) 2. b Discounts on future purchases by the funding party of products produced under the arrangement 3. c A nonexclusive sublicense to the funding party, at no additional charge, for the use of any product developed (a prepaid or paid-up nonexclusive sublicense). #### Entities ##### [730-20-15-2](https://asc.understandingaccounting.org/asc/730/20/#730-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:07.621Z to 2026-09-10T01:15:07.621Z Record version: sha256:a3ccedc9751379b28a220c92fcef9aed2f23c7849c1f0812bd77c7fc15f03ebe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic establishes standards of financial accounting and reporting for an entity that is a party to a [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.") arrangement through which it can obtain the results of research and development funded partially or entirely by others. ##### [730-20-15-3](https://asc.understandingaccounting.org/asc/730/20/#730-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:07.621Z to 2026-09-10T01:15:07.621Z Record version: sha256:e37eef7ee9f91c0cb361c5835865bf668c296c0a0e4cb57961e1420bd3b2b0bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies whether the research and development is performed by the entity, the funding parties, or a third party. Although the limited-partnership form of arrangement is used for illustrative purposes in this Subtopic, the guidance also applies for other forms. #### Transactions ##### [730-20-15-4](https://asc.understandingaccounting.org/asc/730/20/#730-20-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:07.621Z to 2026-09-10T01:15:07.621Z Record version: sha256:f66543373858c09eff40497e1a3acaa83e56e15c3cbe06e77680a4f8663c09dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Government-sponsored research and development. 2. b Funded software-development arrangements in which the technological feasibility of the computer software product, in accordance with the provisions of Subtopic 985-20 on software, has been established before the arrangement has been entered into (see paragraph [985-20-25-12](https://asc.understandingaccounting.org/asc/985/20/#985-20-25-12)). Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:c9a057f1ee9bc4e112e67b59b2fd07afa7c0ae7a4bd11aec05e275d5c0f9704b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/730/20/#25-recognition) SEC content: no ##### [730-20-25-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:22d536fb34b941c17a9f73c9a50ec719f42400b8f57159fe4dca3c9b1bed00a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic deals with transactions in which the issue is whether, at the time an entity enters into a [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.") arrangement: 1. a The entity is committed to repay any of the funds provided by the other parties regardless of the outcome of the research and development. 2. b Existing conditions indicate that it is likely that the entity will repay the other parties regardless of the outcome. 3. c The entity is obligated only to perform research and development work for others. ##### [730-20-25-2](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:69a11307f9e82c72ae9e23598b5d629b68d34f6b1c3681cf9ed1da2c23309655 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall determine the nature of the obligation it incurs when it enters into an arrangement with other parties who fund its research and development. The factors discussed in paragraphs [730-20-25-3 through 25-9](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-3) and other factors that may be present and relevant to a particular arrangement shall be considered when determining the nature of the entity's obligation. #### Obligation to Repay the Other Parties ##### [730-20-25-3](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:7403d5f371fbde3675cbd32d8faa199761b0e2a39e6f6f326bac7d8f0ab5bd56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the entity is obligated to repay any of the funds provided by the other parties regardless of the outcome of the research and development, the entity shall estimate and recognize that liability. This requirement applies whether the entity may settle the liability by paying cash, by issuing securities, or by some other means. ##### [730-20-25-4](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:7aba7f9502bc4a839a8872e6f18362edc6ba3d53a6b85abddbaedba7989d17f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To conclude that a liability does not exist, the transfer of the financial risk involved with research and development from the entity to the other parties must be substantive and genuine. To the extent that the entity is committed to repay any of the funds provided by the other parties regardless of the outcome of the research and development, all or part of the risk has not been transferred. The following are some examples in which the entity is committed to repay: 1. a The entity guarantees, or has a contractual commitment that assures, repayment of the funds provided by the other parties regardless of the outcome of the research and development. 2. b The other parties can require the entity to purchase their interest in the research and development regardless of the outcome. 3. c The other parties automatically will receive debt or equity securities of the entity upon termination or completion of the research and development regardless of the outcome. ##### [730-20-25-5](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:2232351306999b6e4402bb9b9bb04c517c13be175b5e805db348b1a1013944cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Even though the written agreements or contracts under the arrangement do not require the entity to repay any of the funds provided by the other parties, surrounding conditions might indicate that the entity is likely to bear the risk of failure of the research and development. If those conditions suggest that it is probable that the entity will repay any of the funds regardless of the outcome of the research and development, there is a presumption that the entity has an obligation to repay the other parties. That presumption can be overcome only by substantial evidence to the contrary. In this context, [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") means that repayment is likely. ##### [730-20-25-6](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:744cfa39e77f605e4f7dce26bc170f29905e6892fc38ebb43276e05166b860ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of conditions leading to the presumption that the entity will repay the other parties include any of the following: 1. a The entity has indicated an intent to repay all or a portion of the funds provided regardless of the outcome of the research and development. 2. b The entity would suffer a severe economic penalty if it failed to repay any of the funds provided to it regardless of the outcome of the research and development. An economic penalty is considered severe if in the normal course of business an entity would probably choose to pay the other parties rather than incur the penalty. For example, an entity might purchase the partnership's interest in the research and development if the entity had provided the partnership with proprietary basic technology necessary for the entity's ongoing operations without retaining a way to recover that technology, or prevent it from being transferred to another party, except by purchasing the partnership's interest. 3. c A significant [related party](https://asc.understandingaccounting.org/glossary/r/#related-parties "Related parties include: Affiliates of the entity Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management Principal owners of the entity and members of their immediate families Management of the entity and members of their immediate families Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.") relationship between the entity and the parties funding the research and development exists at the time the entity enters into the arrangement. 4. d The entity has essentially completed the project before entering into the arrangement. ##### [730-20-25-7](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:07b200f268dc3c2dad5c08c4ec41d687bcd81c6218799bedc6f9f630dcf61e77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that incurs a liability to repay the other parties shall charge the research and development costs to expense as incurred. The amount of funds provided by the other parties might exceed the entity's liability. That might be the case, for example, if license agreements or partial buy-out provisions permit the entity to use the results of the research and development or to reacquire certain basic technology or other assets for an amount that is less than the funds provided. Those agreements or provisions might limit the extent to which the entity is economically compelled to buy out the other parties regardless of the outcome. In those situations, the liability to repay the other parties might be limited to a specified price for licensing the results or for purchasing a partial interest in the results. If the entity's liability is less than the funds provided, the entity shall charge its portion of the research and development costs to expense in the same manner as the liability is incurred. For example, the liability might arise as the initial funds are expended, or the liability might arise on a pro rata basis. #### Obligation to Perform Contractual Services ##### [730-20-25-8](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:b23bc0561d3cd20efec50584fc50d06c37c38ba23f4f7a645645576a85cede11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent that the financial risk associated with the research and development has been transferred because repayment of any of the funds provided by the other parties depends solely on the results of the research and development having future economic benefit, the entity shall account for its obligation as a contract to perform research and development for others. ##### [730-20-25-9](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:50df9f517768341751811745b3a45a2dd14e326cc22275c3aa1efa753224afbd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the entity's obligation is to perform research and development for others and the entity subsequently decides to exercise an option to purchase the other parties' interests in the research and development arrangement or to obtain the exclusive rights to the results of the research and development, the nature of those results and their future use shall determine the accounting for the purchase transaction or business combination (or an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities.")). ##### [730-20-25-10](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:30e9f06f0ec27908defad5e0ce626462e672260a4f3bc5ab5f7a50faf66b88b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting for the cost of an item to be used in research and development is specified by paragraphs [730-10-25-1 through 25-2](https://asc.understandingaccounting.org/asc/730/10/#730-10-25-1) . The accounting for recognized intangible assets acquired by the entity is specified in Topic 350. #### Loan or Advance to Other Parties ##### [730-20-25-11](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:275f0fb46d00d8167f84661d6d7d5ed693b89b15d9a7c54e4618feb3ae99ee8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If repayment to the entity of any loan or advance by the entity to the other parties depends solely on the results of the research and development having future economic benefit, the loan or advance shall be accounted for as costs incurred by the entity. The costs shall be charged to research and development expense unless the loan or advance to the other parties can be identified as relating to some other activity, for example, marketing or advertising, in which case the costs shall be accounted for according to their nature. #### Issuance of Warrants or Similar Instruments ##### [730-20-25-12](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:52d6ba36b2272a611872eca3af0c1ae2281515a6f137088930eecb6c96aaa3dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If warrants or similar instruments are issued in connection with the arrangement, the entity shall report a portion of the proceeds to be provided by the other parties as paid-in capital. The amount so reported shall be the fair value of the instruments at the date of the arrangement. #### Certain Nonrefundable Advance Payments ##### [730-20-25-13](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:e04282d0eb7e31a83cc18363edc16bab714463324fe15c2ce41d9575369d5b8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Nonrefundable advance payments for goods or services that have the characteristics that will be used or rendered for future research and development activities pursuant to an executory contractual arrangement shall be deferred and capitalized. The guidance in this paragraph does not apply to refundable advance payments for future research and development activities. An entity shall not apply the guidance in this paragraph by analogy to other types of advance payments. ##### [730-20-25-14](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:14.755Z to 2026-09-10T01:15:14.755Z Record version: sha256:23ab8fc7dae1e55a7760de6a2ee7f8ed5048ae733b63df0e57754c8e7043bfc8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [730-10-55-3](https://asc.understandingaccounting.org/asc/730/10/#730-10-55-3) states that nonrefundable advance payments for future research and development activities for materials, equipment, facilities, and purchased intangible assets that have an alternative future use (in research and development projects or otherwise) shall be recognized in accordance with Subtopic 730-10. Source downloaded (UTC): 2026-09-10T01:15:18.204Z to 2026-09-10T01:15:18.204Z Record version: sha256:c5aa6e2378dcca3e979c276c7b4440b95b51be230ad42c22b40c3d6a3b856b13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/730/20/#35-subsequent-measurement) SEC content: no #### Certain Nonrefundable Advance Payments ##### [730-20-35-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:18.204Z to 2026-09-10T01:15:18.204Z Record version: sha256:8523d3a2a47c15dc800ad179c38c31ab737bf18fcecfa001280ad6b59d0f6f0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Nonrefundable advance payments capitalized under paragraph [730-20-25-13](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-13)shall be recognized as an expense as the related goods are delivered or the related services are performed. An entity shall continue to evaluate whether it expects the goods to be delivered or services to be rendered. If an entity does not expect the goods to be delivered or services to be rendered, the advance payment capitalized under paragraph [730-20-25-13](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-13) shall be charged to expense. The guidance in this paragraph does not apply to refundable advance payments for future research and development activities. An entity shall not apply the guidance in this paragraph by analogy to other types of advance payments. Source downloaded (UTC): 2026-09-10T01:15:19.916Z to 2026-09-10T01:15:19.916Z Record version: sha256:4ca2c91620d077720def6f94290ad0bfe8ef317a688853e7069a9866fbd770f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/730/20/#50-disclosure) SEC content: no ##### [730-20-50-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:19.916Z to 2026-09-10T01:15:19.916Z Record version: sha256:597b6d5d0ce8aa461c83df74baf7f5b0cdb1150401d0a9171063151d5a51fa70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that under the provisions of this Subtopic accounts for its obligation under a [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.") arrangement as a contract to perform research and development for others shall disclose both of the following: 1. a The terms of significant agreements under the research and development arrangement (including royalty arrangements, purchase provisions, license agreements, and commitments to provide additional funding) as of the date of each balance sheet presented 2. b The amount of compensation earned and costs incurred under such contracts for each period for which an income statement is presented. ##### [730-20-50-2](https://asc.understandingaccounting.org/asc/730/20/#730-20-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:19.916Z to 2026-09-10T01:15:19.916Z Record version: sha256:a7ff2c4a42c3decf708588bb504f7a3e391c05a8a42846c18adc1d426ccc6499 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Topic 850 specifies additional disclosure requirements for [related party](https://asc.understandingaccounting.org/glossary/r/#related-parties "Related parties include: Affiliates of the entity Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management Principal owners of the entity and members of their immediate families Management of the entity and members of their immediate families Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.") transactions and certain control relationships. ##### [730-20-50-3](https://asc.understandingaccounting.org/asc/730/20/#730-20-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:19.916Z to 2026-09-10T01:15:19.916Z Record version: sha256:466847924836a958dd4e9e1915de57de670c0591ea894877bba82e16f0f66fa3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that is a party to more than one research and development arrangement need not separately disclose each arrangement unless separate disclosure is necessary to understand the effects on the financial statements. Aggregation of similar arrangements by type may be appropriate. Source downloaded (UTC): 2026-09-10T01:15:22.975Z to 2026-09-10T01:15:22.975Z Record version: sha256:25c1a5a033137965eb06afe96c6093057bf901062461798831af820a8a5fa649 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/730/20/#60-relationships) SEC content: no #### Contingencies ##### [730-20-60-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:22.975Z to 2026-09-10T01:15:22.975Z Record version: sha256:944448e97133b5a2ad331d9d8c5c02b8478de7c1d5a4764df9820a7a5d5c20de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance related to loss contingencies, see Subtopic 450-20. #### Consolidation ##### [730-20-60-2](https://asc.understandingaccounting.org/asc/730/20/#730-20-60-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:22.975Z to 2026-09-10T01:15:22.975Z Record version: sha256:4017779c44799211eda2deb799a940388e67f7966ff5f9dae78c702867d6da75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on whether and how a [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") should consolidate a research and development arrangement, see Subtopic 810-30. Source downloaded (UTC): 2026-09-10T01:15:27.032Z to 2026-09-10T01:15:27.032Z Record version: sha256:301f94b9c59564c4c799dd1b59f81dbc8ed5c862da8823a66d1040fe2c58309b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/730/20/#65-transition-and-open-effective-date-information) SEC content: no ##### [730-20-65-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-65-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:27.032Z to 2026-09-10T01:15:27.032Z Record version: sha256:9d7591a21c3ffd6abd587793c520f2ebe0da566792ac02d69605db3ce5f23d47 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 03/23/2010 after the end of the transition period stated in EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities." Source downloaded (UTC): 2026-09-10T01:15:30.764Z to 2026-09-10T01:15:30.764Z Record version: sha256:bee76b29f1934f9cdcd9994b4ab167f1c1f022c9d16e3542268fbdd18ba900ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/730/20/#sec-00-status) SEC content: yes ##### [730-20-S00-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:30.764Z to 2026-09-10T01:15:30.764Z Record version: sha256:f70253e6904dc18a36425e5c25161c285c31f035d1bc9eaa055204517792a5cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
730-20-S99-1AmendedAccounting Standards Update No. 2012-0308/27/2012
730-20-S99-1AmendedAccounting Standards Update No. 2009-0308/24/2009
Source downloaded (UTC): 2026-09-10T01:15:32.496Z to 2026-09-10T01:15:32.496Z Record version: sha256:525e5f82a6971d7c41a355f7e5b3d7a33c84373dee343dd86062694ad005a2cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-S20: SEC 20 Glossary [Read section](https://asc.understandingaccounting.org/asc/730/20/#sec-20-glossary) SEC content: yes Source downloaded (UTC): 2026-09-10T01:15:36.522Z to 2026-09-10T01:15:36.522Z Record version: sha256:dc1068cb0ecaab6feb8b4acd80ea9d6e81b70c07de9bd9ae1e46815d25f77e6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-S55: SEC 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/730/20/#sec-55-implementation-guidance-and-illustrations) SEC content: yes #### Obligation Is a Liability to Repay the Other Parties ##### [730-20-S55-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-S55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:36.522Z to 2026-09-10T01:15:36.522Z Record version: sha256:c68312a5bc4fa3e9a4c7c416df4c4d0caac6b0f0aa7231a9607a3ece433396c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [730-20-S99-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-S99-1), SAB Topic 5.O, for SEC Staff views on determining whether an entity is able to repay funds provided by other parties in a research and development arrangement. Source downloaded (UTC): 2026-09-10T01:15:40.514Z to 2026-09-10T01:15:40.514Z Record version: sha256:c23551843e3f44e1335dc015c71f724c218d5d5278e59a46d017d8f831e59fc0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-20-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/730/20/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [730-20-S99-1](https://asc.understandingaccounting.org/asc/730/20/#730-20-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:40.514Z to 2026-09-10T01:15:40.514Z Record version: sha256:913a18efc4185654b888553902125c63f82bee28982d72e60c4d0da9280bb6d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.O, Research and Development Arrangements. - Facts: FASB ASC paragraph [730-20-25-5](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-5) (Research and Development Topic) states that conditions other than a written agreement may exist which create a presumption that the enterprise will repay the funds provided by other parties under a research and development arrangement. FASB ASC subparagraph [730-20-25-6(c)](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-6) lists as one of those conditions the existence of a "significant related party relationship" between the enterprise and the parties funding the research and development. - Question 1: What does the staff consider a "significant related party relationship" as that term is used in FASB ASC subparagraph [730-20-25-6(c)](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-6)? - Interpretive Response: The staff believes that a significant related party relationship exists when 10 percent or more of the entity providing the funds is owned by related parties. FN14 In unusual circumstances, the staff may also question the appropriateness of treating a research and development arrangement as a contract to perform service for others at the less than 10 percent level. In reviewing these matters the staff will consider, among other factors, the percentage of the funding entity owned by the related parties in relationship to their ownership in and degree of influence or control over the enterprise receiving the funds. - FN14 Related parties as used herein are as defined in the FASB ASC Master Glossary. - Question 2: FASB ASC paragraph [730-20-25-5](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-5) states that the presumption of repayment "can be overcome only by substantial evidence to the contrary." Can the presumption be overcome by evidence that the funding parties were assuming the risk of the research and development activities since they could not reasonably expect the enterprise to have resources to repay the funds based on its current and projected future financial condition? - Interpretive Response: No. FASB ASC paragraph [730-20-25-3](https://asc.understandingaccounting.org/asc/730/20/#730-20-25-3) specifically indicates that the enterprise "may settle the liability by paying cash, by issuing securities, or by some other means." While the enterprise may not be in a position to pay cash or issue debt, repayment could be accomplished through the issuance of stock or various other means. Therefore, an apparent or projected inability to repay the funds with cash (or debt which would later be paid with cash) does not necessarily demonstrate that the funding parties were accepting the entire risks of the activities. Source downloaded (UTC): 2026-09-10T01:15:43.389Z to 2026-09-10T01:16:04.136Z Record version: sha256:6cdf6d19f2766ba74de02956107dbafda5d31962c5f3a32df9cf949dfc37154a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912: Research and Development — Contractors—Federal Government ### Machine-generated study aids ```json { "summary": "This subtopic tells government contractors how to account for best-efforts-basis, research-and-development-cost-sharing arrangements with the federal government. When all six scope conditions in 730-912-15-2 are met (qualifying R&D, contractor retains rights to data/results, best-efforts-only obligation, mutual expectation that costs will exceed funding, no contract combination under 606-10-25-9, and the federal government as sole or principal ultimate customer), the arrangement is not a revenue contract under Topic 606. Instead, costs are expensed as R&D as incurred under Topic 730, and customer funding is recorded as an offset to aggregate R&D expense rather than as contract revenue (730-912-25-1).", "key_points": [ "The Subtopic applies only if all conditions of 730-912-15-2 are met, including that the activities qualify as research and development under Subtopic 730-10 and the contractor retains a right to the data and results.", "The contract must obligate the contractor to perform only on a best-efforts basis toward agreed-on objectives, not to deliver a product or service meeting defined performance or design specifications (730-912-15-2(c)).", "At contract inception both parties must expect costs to exceed amounts funded, evidenced by contractual or other documentation, implying significant uncertainty about securing follow-on contracts (730-912-15-2(d)).", "The arrangement must not be combined with other contracts under paragraph 606-10-25-9, and the federal government (including foreign military sales) must be the sole or principal expected ultimate customer (730-912-15-2(e)-(f)).", "Arrangements in scope differ from contracts with customers under Topic 606 and are research and development as described in paragraph 730-10-15-4(c) (730-912-15-3).", "Costs are recognized as research and development expense as incurred in conformity with Topic 730, and amounts funded by the customer are recognized as an offset to aggregate R&D expense rather than as contract revenues (730-912-25-1).", "Example 1 (730-912-55-1 through 55-3) illustrates the offset accounting where estimated aggregate costs are $150, anticipated customer reimbursement is $100, 50% of costs have been incurred, and the customer has paid 30% of its pro rata funding." ], "categories": [ "Recognition", "Revenue", "Industry-specific", "Presentation" ], "audience_level": "intermediate", "student_note": "The exam trap is treating customer funding as revenue: under this Subtopic the reimbursement is netted against R&D expense, not presented as contract revenue, because the arrangement is cost sharing rather than a Topic 606 contract with a customer. Watch the six scope conditions closely—failing even one (e.g., defined performance specifications, or a non-federal ultimate customer) pushes the arrangement back into Topic 606.", "related_topics": [ "730-10", "606-10", "912-10", "912-20", "912-235" ], "key_concepts": [ "best-efforts basis arrangement", "research and development cost sharing", "government contractor", "offset to research and development expense", "rights to data and results", "expectation of costs in excess of funding", "follow-on contract uncertainty", "combining contracts" ] } ``` Source downloaded (UTC): 2026-09-10T01:15:43.389Z to 2026-09-10T01:15:43.389Z Record version: sha256:15728f05b7cabe86e58f9298d438b9bf171bad6a0fb8f93da876023d64081fde Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/730/912/#00-status) SEC content: no ##### [730-912-00-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:43.389Z to 2026-09-10T01:15:43.389Z Record version: sha256:b67e7e2199931df3f25c92adce3b62e6901b20d7f6e68115a4d80caf103ca3ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
ContractsAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
912-730-15-2AmendedAccounting Standards Update No. 2014-0905/28/2014
912-730-15-3AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:15:47.207Z to 2026-09-10T01:15:47.207Z Record version: sha256:24697d3d61ef8a12401aa772590ce218824d7695bb3e6dd33c4c823e76986c22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/730/912/#05-overview-and-background) SEC content: no ##### [730-912-05-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:47.207Z to 2026-09-10T01:15:47.207Z Record version: sha256:bb6d3521211e254e78b5ebc105253b5dca713ea94209aab208b91ffb113e9a6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to government contractors related to identifying research and development activities included in government contracts and the accounting for such activities. #### Best-Efforts-Basis, Research-and-Development-Cost-Sharing Arrangements ##### [730-912-05-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:47.207Z to 2026-09-10T01:15:47.207Z Record version: sha256:8d311380132fa6ecfbc7c5b377e72fa2965206112aef830b28ac9b23eb7960df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contractors may enter into contractual arrangements in which the customer agrees to share the estimated costs of certain research and development activities, for example, the development of a prototype for new or advanced weapons systems. In arrangements to perform on a best-efforts basis, the contractor benefits from both lower net research and development costs and the retention of rights to the research and development results. The knowledge gained from such research and development activities may be used by the contractor in future production activities, including follow-on contracts for full-scale production of products based on the prototypes or models developed during the research and development phase. At the same time, the customer benefits from the arrangement by receiving a nonexclusive right to the results of the research and development effort. Consequently, the customer is able to encourage the contractor to focus its research and development efforts on activities important to the customer's long-range, strategic objectives in areas such as national defense. Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:b481fa568af1c7dec9707d678665abd568ae39ea9e0116a1334149234f79c1b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/730/912/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [730-912-15-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:940165b2722c151526bb4a06a176c3d9be036ea53a8758eff1f26e25ec87d618 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 912-10-15, with specific instrument qualifications noted below. #### Instruments ##### [730-912-15-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:7e1e5f6f83223b71931d3edde08034972fd41e1ebd4e25fa61580c3d21112aca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic applies only to contractual arrangements meeting all of the following conditions: 1. a The activities performed in connection with the contractual arrangement qualify as research and development (see Subtopic 730-10). 2. b The contractor retains a right to the data and results of the research and development activities. 3. c The contractual arrangement obligates the contractor to perform only on a best-efforts basis to achieve the agreed-on objectives of the research and development activity, rather than to deliver a product or service meeting defined performance or other (such as design) specifications. 4. d At the inception of the contract, the contractor and the customer enter into the arrangement with the expectation that costs will be incurred in excess of amounts to be funded. This condition will be met if contractual or other documentation specifically evidences acknowledgment of this expectation by both the contractor and the customer. Implicit in this condition is the existence of significant uncertainty at the date the contractor enters into the arrangement regarding the likelihood of successfully securing follow-on contracts related to the research and development activity. 5. e The research and development arrangement is not combined with other contracts in accordance with the guidance on combining contracts in paragraph [606-10-25-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-9). 6. f The federal government is the sole or principal expected ultimate customer (including foreign military sales) for the research and development activity or products directly resulting from the research and development activity subject to the arrangements. ##### [730-912-15-3](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:51.169Z to 2026-09-10T01:15:51.169Z Record version: sha256:1195acbb01832a9b5e3230d98f55b087b2bda48f60281ab1e10f19ed59b0bf8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contractual arrangements meeting all of the conditions in the preceding paragraph differ from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") addressed in Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from contracts with customers. Such activities are research and development as discussed in paragraph [730-10-15-4(c)](https://asc.understandingaccounting.org/asc/730/10/#730-10-15-4). Source downloaded (UTC): 2026-09-10T01:15:58.968Z to 2026-09-10T01:15:58.968Z Record version: sha256:47704697080324f22af4ba6950526444ca328a2bfda1ecce8099d17d1b70de1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/730/912/#25-recognition) SEC content: no #### Best-Efforts-Basis, Research-and-Development-Cost-Sharing Arrangements ##### [730-912-25-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:15:58.968Z to 2026-09-10T01:15:58.968Z Record version: sha256:8a5552693ac3310c111b2359ddea057d23e6e7606a9f161276ff24ec340cb66d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Best-efforts-basis, research-and-development-cost-sharing arrangements within the scope of this Subtopic (see paragraph [912-730-15-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-15-2)) shall be recognized as research and development expense as incurred in conformity with Topic 730. Because of the cost-sharing nature of these fixed-price, best-efforts-basis, research-and-development-cost-sharing arrangements, the amounts funded by the customer shall be recognized as an offset to the contractor's aggregate research and development expense rather than as contract revenues. Example 1 (see paragraphs [912-730-55-1 through 55-3](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-1) ) illustrates the application of this guidance. Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:185c73d7107fc8a6f4a5e950ae7b9b4a3557d7677c8847341a8dc5507257140b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-912-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/730/912/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [730-912-55-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:1ac03872a47c356fca9efb7e32ae2f18100d8d949b8590f89e2644abf971054b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the guidance in paragraph [912-730-25-1](https://asc.understandingaccounting.org/asc/730/912/#730-912-25-1) to research and development costs under a best-efforts-basis, research-and-development-cost-sharing arrangement. ##### [730-912-55-2](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:72f909141e0d77c56eef6367fa138db4f4af8c0e49d39a93f7806b8055156a2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example has the following assumptions: 1. a Estimated aggregate cost to be incurred by contractor in the specified research and development activity: $150 2. b Anticipated reimbursement from customer: $100 3. c As of the current reporting date 50 percent of the estimated aggregate costs have been incurred 4. d Customer has paid 30 percent of its pro rata funding. ##### [730-912-55-3](https://asc.understandingaccounting.org/asc/730/912/#730-912-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:00.864Z to 2026-09-10T01:16:00.864Z Record version: sha256:8ce7de1d87fbc3108deb1ee2578fd389f0a97d705cdf48142a45d19e1d8ca88a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates how to record expenditures for research and development in connection with the XYZ project. - ![](https://asc.understandingaccounting.org/asc-img/GUID-C00319E4-E29A-4E9C-8193-CEBC513CBB06-low.gif) Accounting Entries Research and Development Expense $75 Cash $75 To record expenditures for research and development in connection with the XYZ project. Receivable 35 Cash 15 Research and Development Expense 50 To record amounts receivable and collections of receivables from customer in connection with the XYZ project. Source downloaded (UTC): 2026-09-10T01:16:06.499Z to 2026-09-10T01:16:08.583Z Record version: sha256:ac6b917f823231403f69a215d779c619418480bc92dd6503347172f40feb86c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-985: Research and Development — Software ### Machine-generated study aids ```json { "summary": "ASC 730-985 is a \"link\" subtopic: it contains no substantive rules of its own but points readers from the research and development Topic to the software guidance. It directs users to 985-20-25-1 for costs incurred to establish the technological feasibility of software to be sold, leased, or otherwise marketed, and to 985-20-25-8 through 25-10 for the cost of purchased software to be marketed.", "key_points": [ "This Subtopic only provides links to guidance on research and development costs of computer software (730-985-05-1).", "Paragraph 985-20-25-1 governs the treatment of costs incurred to establish the technological feasibility of a computer software product to be sold, leased, or otherwise marketed (730-985-25-1).", "Paragraphs 985-20-25-8 through 25-10 govern the cost of purchased computer software to be sold, leased, or otherwise marketed (730-985-25-2).", "Because the Subtopic is purely a cross-reference, no recognition, measurement, or disclosure requirements originate here." ], "categories": [ "Recognition", "Intangibles and goodwill", "Industry-specific" ], "audience_level": "introductory", "student_note": "Know the navigation point: software R&D questions are answered in ASC 985-20, not in ASC 730 itself. The common misunderstanding is thinking ASC 730 sets a separate rule for software costs — it simply expenses costs until technological feasibility is established under 985-20.", "related_topics": [ "985-20", "730-10", "350-40", "350-30" ], "key_concepts": [ "research and development costs", "computer software to be sold, leased, or otherwise marketed", "technological feasibility", "purchased computer software", "cross-reference subtopic", "software capitalization" ] } ``` Source downloaded (UTC): 2026-09-10T01:16:06.499Z to 2026-09-10T01:16:06.499Z Record version: sha256:1d0974898e2c841969615c525b56da0485789224ff0695e6f15de97a25eaec62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-985-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/730/985/#05-overview-and-background) SEC content: no ##### [730-985-05-1](https://asc.understandingaccounting.org/asc/730/985/#730-985-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:06.499Z to 2026-09-10T01:16:06.499Z Record version: sha256:036014cabbe3a3225762380f791f5f0dbb7b14414c5e17ff8b9574902bc75f27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic only provides links to guidance on research and development costs of computer software. Source downloaded (UTC): 2026-09-10T01:16:08.583Z to 2026-09-10T01:16:08.583Z Record version: sha256:cfb08052770e511f05f11baa758bf9b6a6dfe1f6144fc050f39ff9914aa32d2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 730-985-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/730/985/#25-recognition) SEC content: no #### Costs to Establish Technological Feasibility ##### [730-985-25-1](https://asc.understandingaccounting.org/asc/730/985/#730-985-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:08.583Z to 2026-09-10T01:16:08.583Z Record version: sha256:ae69b2ac9db369fd84de78d8a1805a39adc314db197971e5fd2ca03c20482363 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [985-20-25-1](https://asc.understandingaccounting.org/asc/985/20/#985-20-25-1) specifies the treatment for costs incurred to establish the technological feasibility of a computer software product to be sold, leased, or otherwise marketed. #### Costs of Purchased Computer Software ##### [730-985-25-2](https://asc.understandingaccounting.org/asc/730/985/#730-985-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:08.583Z to 2026-09-10T01:16:08.583Z Record version: sha256:47e7a6fa172fa4e491a79eeb26263992af477ca084f1c7313cd8b1e2c4c692a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [985-20-25-8 through 25-10](https://asc.understandingaccounting.org/asc/985/20/#985-20-25-8) for guidance regarding the cost of purchased computer software to be sold, leased, or otherwise marketed.