R&D expense
Financial Accounting glossary · Financial Accounting
Definition
Research and development costs; generally expensed as incurred under US GAAP (vs IFRS, which capitalizes development phase costs meeting criteria).
R&D expense in plain English
R&D is the money a company spends trying to invent or improve things — think a drug company testing new medicines or a tech firm designing a new chip. Under US accounting rules, this spending is treated as an expense the moment you spend it, meaning it immediately lowers reported profit, even though the payoff (a hit product) might come years later. It's like counting the full cost of ingredients for a recipe you're still experimenting with, before you know if the dish will sell. (Fun wrinkle: the international rulebook, IFRS, is more lenient and lets some later-stage development costs be spread out over time instead.)
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