Accounting for FDA Approval Costs: Can They be Capitalized?
Schultz, Katy B.
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The costs for FDA approval are considered research and development costs. The FASB has never mentioned FDA approval costs in their pronouncements and therefore the method of treatment for these costs was uncertain. The purpose of this paper is to determine what the treatment of FDA approval costs should be and if that method is consistent with the treatment of research and development expenses. The main concern being whether to expense the costs or capitalize the costs as assets. The accounting rules were examined regarding research and development costs, and the definition of FDA costs was determined. Data from companies who incur research, development, and FDA costs was examined to determine what type of treatment they used. After gathering this information, I combined and compared it to determine that the most cornmon, if not only treatment method used by the companies was to expense research, development, and FDA costs.