The Treatment of Investments in Intellectual Property at Apple Research Paper

The Treatment of Investments in Intellectual Property at Apple - Research Paper Example While these attributes have become the focus of regulation of SFAS 2 and subsequent standards SFAS 68 and 86, the objective determination thereof remains elusive and indeterminate, and therefore open to managerial discretion. The study also comments on the differences in accounting treatment among standards, such as between the SFAS and the IAS, concerning R&D expenditures. In the past it has been found that regulations allows for large write-offs of acquired R&D in favor of the acquirer, which have been tightened by recently developed standards embodied in SFAS 141 and 142. From published reports, Apple appears substantially and formally compliant with these regulations; however, greater detail and information on specific projects unavailable in the published reports would be required by a sitting and competent body to assess whether these treatments are fully compliant with the letter and spirit of SFAS. ... How close to actuality a firm assesses the value of its assets depends upon how faithfully the accounting treatment mirrors the nature of the asset. Tangible assets are easily valued; intangible ones are more ambiguous. Of all intangible assets a technology corporation, the most important – and most difficult to assess – is its intellectual property, and the research and development effort that goes into building it. Research efforts, when successful, lay the foundation for the company’s incomes for the long-term, and therefore should be capitalized; however, since a good amount of R&D efforts are not successful, there is also a possibility that these costs would have short-term implications that does not justify depreciation into the future. This research paper will search for answers to the question: How does a high-technology company with its own proprietary research and development treat its R&D expenditures treat its research and development costs in its fin ancial reports, given that research and development efforts may or may not result in marketable products? The study shall focus on the procedure applied in Apple, Inc., the company of choice because of their high-profile, highly successful new technologies in personal communication devices, for both hardware and software. U.S. GAAP for Research and Development Expenditures The U.S. Generally Accepted Accounting Principles is the body of accounting rules and standards according to which financial statements for companies in the U.S. are prepared, particularly publicly traded and held companies and non-profit organizations. The U.S. GAAP is embodied in the