Accounting
Standard 8 (AS 8), issued by the council of the Institute of Chartered Accountants
of India (ICAI) on "Accounting for Research and Development", deals
with the treatment of costs of research and development in financial statements.
This standard does not deal with the accounting implications of some specialized
activities such as research and development activities conducted on contract basis
for others, exploration for oil, gas and mineral deposits, and research and development
costs of enterprises at the construction stage.
The
terms research and development are defined as "Research is original and planned
investigation undertaken with the hope of gaining new scientific or technical
knowledge and understanding" and "Development is the translation of
research findings or other knowledge into a plan or design for the production
of new or substantially improved materials, devices, products, processes, systems
or services prior to the commencement of commercial production."
This
standard, AS 8, deals with the costs of research and development of the financial
statements of the enterprises, involves practical difficulties in identifying
the amounts of the costs specifically attributable to this segment. In order to
avoid this difficulty and achieve reasonable level of comparability between the
enterprises and between accounting periods of the same enterprise, it is mandatory
to identify the elements those comprise research and development costs.
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