Dataline: Assets acquired to be used in research and development activities - AICPA issues updated Accounting and Valuation Guide (No. 2014-04)

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Dataline 01/30/2014 by Assurance services
Dataline: Assets acquired to be used in research and development activities - AICPA issues updated Accounting and Valuation Guide (No. 2014-04)

At a glance

The AICPA’s Financial Reporting Executive Committee (FinREC) recently issued an Accounting and Valuation Guide covering acquired in process research and development assets.

The AICPA’s Financial Reporting Executive Committee (FinREC) recently issued an Accounting and Valuation Guide covering acquired in process research and development assets. The Guide, which is non-authoritative, replaces a 2001 AICPA practice aid on this topic.

What are the key changes from the 2001 practice aid? They include:

  • The latest fair value measurement guidance from ASC 820
  • Additional best practices and examples related to valuation techniques and methods used to measure the fair value of IPR&D with a focus on software, electronic devices, and pharmaceutical industries
  • Concepts from ASC 805 addressing the capitalization of assets acquired in a business combination to be used in R&D activities vs. those acquired in an asset acquisition and the accounting impact of any alternative future use for such assets
  • Elimination of the concept of “core technology” and the introduction of “enabling technology,” which has a narrower definition
  • Best practices related to the initial and subsequent accounting for and disclosure of IPR&D, including several illustrative examples of the unit of account

This Dataline summarizes key aspects of the Guide and offers insights into key challenges companies may face.