CFA Level 1 Question of the Week – Financial Reporting and Analysis

An artificial intelligent start-up in Silicon Valley is working on a software for robot babysitters. Assuming that the firm follows US GAAP, how will the firm’s accountant allocate the Research and Development costs most appropriately?

• A. Expense the both Research and Development costs.
• B. Expense the Research cost and capitalize the Development cost.
• C. Capitalize the Research cost and expense the Development cost.