in-process research and development

ASC 350-30 governs the accounting for intangible assets other than goodwill — their recognition when acquired individually or in an asset group, the expensing of internally developed intangibles that are not specifically identifiable, and, for all intangibles (including those from a business combination), their subsequent measurement, impairment, presentation, and disclosure. The core rule is that accounting after acquisition turns on useful life: finite-lived intangibles are amortized over their useful life (residual value presumed zero) and tested for impairment under Subtopic 360-10, while indefinite-lived intangibles are not amortized and are tested for impairment at least annually by comparing fair value with carrying amount.

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.

ASC 810-30 tells a sponsor how to account for a research and development arrangement in which the sponsor funds 100% of the R&D activities — typically by capitalizing a new entity (Newco) with cash and technology rights, spinning off Newco's Class A common stock to the sponsor's shareholders, and retaining a purchase option and nominal Class B shares. The sponsor reclassifies the contributed cash as restricted cash, recognizes R&D expense as the activities are performed, and records the Class A distribution as a dividend at the fair value of that stock. The Class A stock is presented as noncontrolling interest classified in equity but separate from the parent's equity, and exercise of the purchase option is accounted for like an acquisition of a noncontrolling interest.