Accounting and Valuation Guide: Assets Acquired to Be Used in Research and Development Activities

Introduction .01-.11

History and Organization of This Guide .05-.11

1 Valuation Techniques Used to Measure Fair Value of In-Process Research and Development Assets .01-.34

Introduction .01-.05

Cost Approach .06-.09

Market Approach .10-.12

Income Approach .13-.34

2 Definition of and Accounting for Assets Acquired in a Business Combination That Are to Be Used in Research and Development Activities .01-.68

Introduction .01-.05

Key Concepts .06-.38

Recognition of Assets Acquired in a Business Combination .06-.15

Attributes of an Acquired IPR&D Project .16-.17

Unit of Account .18-.24

Core Technology .25-.27

Assets Held for Sale .28

Defensive IPR&D Assets .29-.33

Temporarily Idled or Abandoned Assets .34-.35

Completed Intangible Assets Used in R&D Activities .36-.37

Tangible Assets Used in R&D Activities .38

Explanatory Comments .39-.68

Scope of R&D Activities .39-.43

Specific IPR&D Projects—Life Cycle .44-.47

Specific IPR&D Projects—Substance .48-.53

Specific IPR&D Projects—Incompleteness .54-.63

Questions and Answers—Miscellaneous .64-.68

3 Accounting for Assets Acquired in an Asset Acquisition That Are to Be Used in Research and Development Activities .01-.31

Introduction .01-.09

Key Concepts .10-.12

Key Differences in the Accounting for Asset Acquisitions and Business Combinations .10

Relevant Accounting Guidance .11-.12

Explanatory Comments .13-.31

Alternative Future Use .13-.27

Questions and Answers—Miscellaneous .28-.31

4 Subsequent Accounting for Acquired Intangible Assets That Are to Be Used in Research and Development Activities .01-.86

Introduction .01

Business Combinations .02-.79

Accounting for Indefinite-Lived IPR&D Assets .10-.31

Accounting for Assets Resulting From R&D Activities .32-.79

Income Tax Considerations .80-.82

Valuation Allowance Assessments .80-.81

Identifying the Applicable Tax Rate to Calculate Deferred Tax Assets and Liabilities .82

Additional Considerations for Asset Acquisitions .83-.86

5 Disclosures of Assets Acquired That Are to Be Used in Research and Development Activities .01-.12

Business Combinations .01-.07

Additional Considerations for Asset Acquisitions .08-.12

Questions and Answers—Asset Acquisitions .11-.12

6 Valuation of In-Process Research and Development Assets .01-.200

Introduction .01-.02

Considerations Related to FASB ASC 820 .03-.25

Overview .03-.05

Identification of Market Participants .06-.14

Highest and Best Use for Nonfinancial Assets .15-.25

Use of Prospective Financial Information .26-.78

Overview .26-.27

Steps .28-.78

Application of the Multiperiod Excess Earnings Method to IPR&D Assets .79-.138

Overview .79-.81

Steps .82-.132

Additional Considerations for the Multiperiod Excess Earnings Method .133-.136

Illustrative Example: Multiperiod Excess Earnings Method .137-.138

Application of Relief From Royalty to IPR&D Assets .139-.153

Overview .139-.141

Steps .142-.151

Illustrative Example: Relief From Royalty Method .152

Additional Considerations for Relief From Royalty Method .153

Application of Decision Tree Analysis to IPR&D Assets .154-.170

Overview .154

Pharmaceutical IPR&D Valuation Example: Decision Tree Analysis .155-.168

6 Valuation of In-Process Research and Development Assets—continued Summary of Decision Tree Analysis .169-.170

Other Methods .171-.172

Valuation Report Considerations .173-.184

Identification and Description of IPR&D Assets .176

Valuation of IPR&D Assets .177-.183

Reconciliation of Value Estimates .184

Comprehensive Example .185-.200

Overview .185-.186

Trade Name .187-.188

Patents .189-.190

Customer Relationships .191-.192

Developed Technology .193-.194

IPR&D .195-.197

Additional Analysis .198-.199

Schedules .200

Glossary

Index of Pronouncements and Other Technical Guidance

Subject Index

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