Download US GAAP: Issues and Solutions for the Pharmaceuticals and Life Sciences Industries

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Capitalization and impairment
6. Development expenditure once capitalization criteria are met—Scenario 2
Relevant guidance
Company A has developed a vaccine delivery device and is now
continuing expenditure on the device to add new functionality.
The additional functionality will require Company A to receive
regulatory approval prior to selling the device.
Research and development costs… shall be charged to expense
when incurred [ASC 730–10–25–1].
Expenses are outflows or other using up of assets or incurrences
of liabilities (or a combination of both) from delivering or
producing goods, rendering services, or carrying out other
activities that constitute the entity’s ongoing major or central
operations [CON 6, par. 80].
Should Company A capitalize these
development costs? 
No. Company A should expense as incurred the costs of adding new functionality as these costs are research and
development expenditures.