Research and development (R&D) expenses are associated directly with the research and development of a company's goods or services and any intellectual property generated in the process. A company generally incurs R&D expenses in the process of finding and creating new products or services.
Why is research expensed?
The main reason companies aren't allowed to capitalize their research and development costs is that there's no way to reliably measure the future economic benefits of those costs. R&D involves trial and error – a lot of error.
Is research expensed?
Under IFRS (IAS 382), research costs are expensed, like US GAAP. However, unlike US GAAP, IFRS has broad-based guidance that requires companies to capitalize development expenditures, including internal costs, when certain criteria are met.
