Final answer:
US GAAP expense R&D costs, while IFRS allows for capitalization. US GAAP also provides more guidance on accounting for development costs, while IFRS does not.
Step-by-step explanation:
One key difference between US GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) in the treatment of R&D (Research and Development) expenditures is the way they are accounted for. Under US GAAP, R&D expenses are generally expensed as incurred, while under IFRS, they can be capitalized as an intangible asset if specific criteria are met. This means that under US GAAP, R&D costs are immediately recognized as expenses on the income statement, reducing reported earnings, while under IFRS, they can be spread out over time as the asset is amortized.
Another difference is related to accounting for R&D costs that are externally acquired. Under US GAAP, these costs are generally expensed as incurred, whereas under IFRS, they can be capitalized if certain criteria are met. However, IFRS provides more guidance on how to capitalize these costs, including specifying the conditions that must be met for capitalization.
Lastly, US GAAP provides more detailed guidance on accounting for R&D costs incurred in the development phase, while IFRS does not have such specific guidance. US GAAP requires capitalization of development costs if certain criteria are met, including the existence of a plan for the development, technological feasibility, and the ability to use or sell the product. IFRS, on the other hand, does not have explicit guidance for capitalizing development costs and generally requires the costs to be expensed as incurred.