Question

he theoretical justification for expensing research and development (R&D) cost as it is incurred is based on which of the following arguments?

		R&D costs provide no future benefits, thus it does not meet the definition of an asset
		R&D costs are incurred to generate current period revenue; thus the matching concept requires that it be expensed as incurred.
		Whether R&D costs that have been incurred will provide future benefit is uncertain, thus it does not meet the definition of an asset.
		Since R&D costs have been incurred during the current period, they meet the definition of an expense

Answer 1

Solution: Whether R&D costs that have been incurred will provide future benefit is uncertain, thus it does not meet the definition of an asset

Explanation: The research and development costs would not be categorised as an asset as the main motive of R&D is is to realize economic benefit in future which is uncertain. The rules of Accounting define an asset as something with economic benefits in future. Thus R&D costs does not meet the definition of an asset