![]() Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12) IFRS and US GAAP: Similarities and differences has concluded that the arrangement meets one of the derivative scope exceptions.Business combinations and noncontrolling interestsĮquity method investments and joint ventures to use its best efforts to execute the development plan until regulatory approval or demonstration of failure. Pharma Corp. on the selection of the compound and the overall development plan and budget but does not participate in any of the development or commercialization activities. will not receive any repayment if the compound is not successfully developed. will receive royalties from future sales of the compound if and when it is commercialized, contingent upon regulatory approval of the compound. At the time of funding, successful development of the compound is not yet probable. commits up to a specified dollar amount to fund the R&D for the pre-selected compound. (i.e., no separate legal entity is created) and Investor Co. Funding is paid directly from the Investor Co. for the development of a pre-selected drug compound that is in Phase II clinical studies. ![]() As a result, reporting entities should evaluate the nature of the arrangement and its relationship to the entity’s normal, ongoing operations in determining how the funding should be recognized in the income statement (i.e., as contra-R&D expense, revenue from a contract with a customer under ASC 606, a collaborative arrangement, other income). ASC 730-20 does not include specific guidance on how the funding received in such a scenario should be recognized in the income statement. As a result, any funding received by the reporting entity under the arrangement would generally be recognized through the income statement, the timing of which will depend on the terms and conditions of the arrangement. If a substantive and genuine transfer of financial risk to the funding parties has occurred because repayment of any of the funds depends solely on the results of the R&D having future economic benefit, ASC 730-20-25-8 requires that the obligation be accounted for by the R&D entity as a contract to perform R&D services for others.
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