Based on this fact pattern I would argue that treatment related to ASC 730-20 is applicable. With regard to this accounting standard for research and development, the issue now lies with whether the funding is a liability to repay the PEI or an obligation to perform contractual services. In order to prove that a liability does not exist there must be a transfer of risk from Pharmagen to the PEI that is substantive and genuine (ASC 730-20-25-4). To determine whether risk has been transferred
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Discussion Questions Question 1 It is an issue concerning about R&D costs. FASB ASC 730-10-20 demonstrates the definition of research and development. FASB ASC 730-10-05 stipulates general accounting arrangement to R&D cost. In general, most R&D costs are expensed in the periods incurred, because (1) R&D costs entail a high degree of uncertainty regarding the amount and timing of future benefits, and (2) R&D costs are difficult to match with future revenues due to a lack of
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to ASC 730-20 is applicable. With regard to this accounting standard for research and development, the issue now lies with whether the funding is a liability to repay the PEI or an obligation to perform contractual services. In order to prove that a liability does not exist there must be a transfer of risk from Pharmagen to the PEI that is substantive and genuine (ASC 730-20-25-4). To determine whether risk has been transferred and several factors must be taken into consideration. ASC 730-20-25-6
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Restructuring if the creditor for economic or legal reasons, related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider (FASB ASC 470-60-15-5). That concession either stems from an agreement between the creditor and the debtor or is imposed by law or court (FASB ASC 470-60-15-6). In a Troubled Debt Restructuring, the creditor’s objective is to maximize recovery of its investment by granting relief to the debtor. The creditor expects to obtain
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considered when determining whether a modification constitutes troubled debt. The model and criteria discussed in ASC 470-60-55-4 through 55-14 should be followed. Since the circumstance do not warrant a “Troubled Debt” classification, the rules of 470-50 would be followed as either a Modification or Extinguishment. Resort Co. is extinguished from their liability, according to ASC 405, if either the debtor pays the creditor or the debtor is relieved of the obligation. If debt is extinguished
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troubled debt restructuring based on the following: To determine if troubled debt restructuring applies, both of the following conditions must be present: 1. The company must be experiencing financial difficulty 2. Creditor must grant concessions ASC 470-60-55-8 provides relevant implementation guidance in determining whether or not debtor is experiencing financial difficulties. 55-8 All of the following factors are indicators that the debtor is experiencing financial difficulties: a. The debtor
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MEMO To: Borg Re: Preferred stock classification Facts Borg (the Company) is an early-stage research and development medical device company. Borg has no current products in the marketplace but is in the final stages of going to market with the Heart Valve System. All preliminary trials have been approved by the FDA, and the Company is in the final trial; once the final trial is complete, the Company will present the product to the FDA for final approval. If approved by the FDA, the Heart Valve
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in the period that it announces its intent to call the debt for redemption? ASC References ASC 470-50-40-2 states that “ a difference between the reacquisition price of debt and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains and identified as a separate item.Gains and losses shall not be amortized to future periods. “ ASC 405-20-40 states that “a debtor shall derecognize a liability if and only if it
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deferred income based on ASC 470-10-25-1 (Sales of Future Revenues). It states that when “an entity receives cash from an investor and agrees to pay the investor,” in this case a royalty of future sales, “it is assumed that immediate income recognition is not appropriate due to the facts and circumstances.” Therefore, I believe that Pharmagen should be reporting their royalties, when they are received, as deferred and not immediate income. The only other option under ASC 470-10-25-2 part D is that
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no joint marketing agreements nor will there be collaboration agreements. j. The PEI is entitled to receive royalties associated with the revenues of X and future royalties associated with an existing commercialized drug for a defined period. 3. ASC-730-20 is applicable here. This is because Pharmgen is entering into an agreement with PEI (investors) on a contractural basis to provide services for the R&D results (FASB 68). Pharmgen obtains the exclusive rights to the results in return for royalty
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