In a business combination accounted for as a purchase, if the acquired company has incomplete research and development (R&D) projects, should a portion of the purchase price be allocated to those R&D projects in process and, if so, should the amount be capitalized or immediately charged to expense? EITF DISCUSSION The Task Force did not reach a consensus on this Issue. The Task Force Chairman stated that Interpretation 4 requires a portion of the purchase price to be allocated to R&D projects in process that have value. In addition, if an R&D project in process does not have an alternative future use (as described in Statement 2), the amount allocated to that R&D project should be charged to expense as research and development costs. Although the Task Force members agreed with the Chairman, they questioned the rationale for such accounting and recommended that the FASB reconsider the guidance in Interpretation 4, which might also lead to a reconsideration of Statement 2
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