There are currently differing methods for accounting for Research and Development (R&D) costs between U.S. GAAP and International Financial Reporting Standards (IFRS). Which has the best way to account for Research and Development costs (R&D)?

1 . Introduction

The International Accounting Standards Board (IASB , an autonomous London based body has been working on compiling a stable set of International Financial Reporting Standards (IFRS ) for business corporations . The IFRS was mandated for all publicly listed companies in the European Union in 2005 , and has also been adopted by other countries like Australia

The international accounting fraternity is now steadily moving towards global commonality in accounting practices and procedural reporting . The International Accounting Standards Board (IASB ) has been working towards convergence of global accounting standards . Its mission is

to develop and enforce a single set of global accounting standards , based on preparation of high quality , transparent and comparable financial statements for local and global users

The IASB has also been working very closely with the US Financial Accounting Standards Board (FASB , since 2002 , to bring about convergence between US GAAP and the IFRS . While significant work has been done on harmonizing IFRS with US GAAP and many pending issues are being currently addressed , a number of accounting s continue to be treated differently by these two systems (Herman and Hague , 2006

Treatment of expenses incurred on Research and Development (R D activities remains an area of divergence between the two accounting frameworks . This focuses on the differences between U .S . GAAP and International Financial Reporting Standards (IFRS or IAS , in the accounting of R D activities , examines the progress made towards convergence , and provides suggestions on the appropriate accounting method

2 . Investigation and Analysis

R D activities...