Chapter 16 - Solution Manual

Current research and development expenditures and the

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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. 05-3 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. > Accounting for Research and Development Costs 25-1 All research and development costs encompassed by this Subtopic shall be charged to expense when incurred. b. In a business combination all identifiable assets are recorded at their fair market values under the provisions of FASB 805-20-30. Measurement Principle 30-1 The acquirer shall measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their acquisition-date fair values. 2 Yes, the asset’s value on the acquired company’s books is irrelevant under FASB ASC 805-20- 30-1 FASB ASC 16-2 Consolidations and the EITF Search “new basis.” Found at 805-50. Then select the Print withSources function The FASB ASC paragraphs containing information on new basis of accounting originally issued by the EITF include: The guidance in the New Basis of Accounting (Pushdown) Subsections also addresses whether pushdown accounting is required in the separate financial statements of the acquiree. [EITF 86-09, paragraph ISSUE, sequence 12.2.2.2.2] ] The guidance in the New Basis of Accounting (Pushdown) Subsections applies to the following transactions: a. [A publicly traded master limited partnership formed from assets of existing businesses. Paragraph 805-50-05-7 explains that typically, the general partner of the master limited partnership is affiliated with the existing business . [EITF 87-21, paragraph ISSUE, sequence 15.1] ]
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348 b. [An acquisition in which all of the following conditions are met: [EITF 86-09, paragraph ISSUE, sequence 12.1] ] 1. [The acquiree is not a party to the transaction effecting change in ownership and is not a Securities and Exchange Commission (SEC) registrant. [EITF 86-09, paragraph ISSUE, sequence 12.2.1] ] 2. [A step-up in tax basis is elected. [EITF 86-09, paragraph ISSUE, sequence 12.2.2.1] ] 3. [There are no compelling reasons for retaining the old basis. [EITF 86-09, paragraph ISSUE, sequence 12.2.2.2.1] ] 805-50-15-9 Pending Content: Transition Date: December 15, 2008 Transition Guidance: 805-10-65-1
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