Federal agency R & D contract awards and the FASB rule for privately funded R & D

Article Abstract:

The impact of a change in accounting standards on high technology firms is examined. Statement of Financial Accounting Standards No. 2 and SEC Accounting Series Release No. 178 changed the method of financial reporting for privately funded research and development. It has been contended that this change has made it more difficult for small high-technology companies to secure federal agency research and development (R & D) contracts. Many of these firms had negative changes in the accounting levels used by federal analysts in evaluating the financial health of contract bidders, although cash flows were not affected by the new standard. A survey of 101 small research-intensive firms did not detect any change in the dollar amounts of awards. A comparison of firms that used expensing and deferred accounting methods shows that the R & D rule did not reduce the amount of awards by federal agencies to small research companies.

Research, Industrial research, Accounting and auditing, Administrative agencies, Government agencies, Financial Accounting Standards Board

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Reporting consolidated gains and losses on subsidiary stock issuances

Article Abstract:

The SEC now gives firms the option of reporting subsidiary corporation stock issuance gains either in capital or in income in consolidated financial statements. Such treatment has been extended to stock issued to non-consolidated investors. Companies have started reporting these gains in income. The view is expressed that subsidiary stock issuance gains are substantively similar to those realized when the parent sells part of its subsidiary investment. The treatment of such transactions in practice is also considered. It is suggested that issuing subsidiary stock is similar to a parent's sale of its subsidiary stock, but important differences are noted. The appropriate accounting may depend on the consolidation theory employed. It is also asserted that public reporting of such transactions is often inadequate, especially with respect to footnote disclosure and tax effects.

Methods, Subsidiary corporations, Subsidiaries, Securities, United States. Securities and Exchange Commission, Capital gains tax

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