What is a Purchased In-Process R&D Write-off?

What is a Purchased In-Process R&D Write-off?

• A. An intangible adjustment representing unfinished R&D projects that were purchased in the deal.
• B. A cash payout for R&D milestones.
• C. Depreciation of physical R&D equipment.
• D. A tax credit for acquired R&D.

Answer: (A)

Purchased in-process R&D write-off describes how unfinished R&D projects acquired in a deal are accounted for. In a business combination, the buyer allocates the purchase price to identifiable assets, including intangible assets for in-process R&D. If those projects aren’t expected to be completed or don’t have viable future value, the related intangible is impaired and written off, reflecting an expense and reducing the value of that asset on the books. So the write-off is an adjustment to an intangible asset that represents the unfinished R&D bought in the deal. The other choices describe cash milestones, depreciation of tangible equipment, or tax credits, none of which capture this specific accounting treatment.

Purchased in-process R&D write-off describes how unfinished R&D projects acquired in a deal are accounted for. In a business combination, the buyer allocates the purchase price to identifiable assets, including intangible assets for in-process R&D. If those projects aren’t expected to be completed or don’t have viable future value, the related intangible is impaired and written off, reflecting an expense and reducing the value of that asset on the books. So the write-off is an adjustment to an intangible asset that represents the unfinished R&D bought in the deal. The other choices describe cash milestones, depreciation of tangible equipment, or tax credits, none of which capture this specific accounting treatment.