BACKGROUND REVIEW ON THE DEVELOPMENT OF STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 2: ACCOUNTING FOR RESEARCH AND DEVELOPMENT COSTS
One of the first tasks undertaken by the Financial Accounting Standards Board (FASB) following its establishment in 1973 was to place "on its technical agenda a project on 'Accounting for Research and Development and Similar Costs'" (Financial Accounting Standards Board, 1974, p. 9). The project was placed on the Board's technical agenda in April 1973. The Board noted that, in 1972, total research and development expenditures in the United States approximated $30 billion, of which approximately $20 billion were made by business enterprises. The remaining research and development expenditures were made by government, research universities, and other non profit organizations. The Board also noted that, in 1973, a wide variety of alternative accounting and reporting practices were followed in the United States by business enterprises with respect to research and development expenditures.
Both the economic significance of research and development expenditures in the for profit sector of the economy and the diversity of the accounting and reporting practices applied to these expenditures prompted the Board to place the "Accounting for Research and Development and Similar Costs" project on its technical agenda. The scope of the "project encompassed accounting and reporting by companies in the developmental stage" (Financial Accounting Standards Board, 1974, p. 9).
The Board is comprised of seven members, four of whom must be certified public accountants drawn from practice. The FASB is assisted by a 40 member advisory council. The primary function of the advisory council is to recommend agenda priorities for Board activities, and to review the plans, activities, and statements of financial accounting standards proposed for issue by the Board. The acceptance of a new accounting standard ...