Case Study: FASB ASC 730-25-1

2. As a for-profit entity, my company must record the amount of the donation as an expense at the fair value of the donated asset. In this case, my company must recognized a loss of eight thousand dollars, simply because the fair value of my donated asset is two thousand dollars. Furthermore, I must update my books by debiting “Contribution Expense” and “Loss on disposal of x asset” for $2,000 and $8,000 crediting the asset for $10,000. In this case, the fair value of my asset was lower than its book value forcing me to recognize a loss on my contribution.

FASB ASC 845-10-30-1 In general, the accounting for nonmonetary transactions should be based on the fair values of the assets (or services) involved, which is the same basis as that
used in monetary transactions. Thus, the cost of a nonmonetary asset acquired in exchange for another nonmonetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss shall be recognized on the exchange. The fair value of the asset received shall be used to measure the cost if it is more clearly evident than the fair value of the asset surrendered. Similarly, a nonmonetary asset received in a nonreciprocal transfer shall be recorded at the fair value of the asset received. A transfer of a nonmonetary asset to a stockholder or to another entity in a nonreciprocal transfer shall be recorded at the fair value of the asset transferred and a gain or loss shall be recognized on the disposition of the asset.
FASB ASC 845-10-30-2 The fair value of an entity's own stock reacquired may be a more clearly evident measure of the fair value of the asset distributed in a nonreciprocal transfer if the transaction involves distribution of a nonmonetary asset to eliminate a disproportionate part of owners' interests (that is, to acquire stock for the treasury or for retirement). If one of the parties in a nonmonetary transaction could have elected to receive cash instead of the nonmonetary asset, the amount of cash that could have been received may be evidence of the fair value of the nonmonetary assets exchanged.

1. In this case, the facility is a “Qualifying asset” an asset that takes a substantial period of time to get ready for its intended use. Therefore, borrowing costs that are directly related to the acquisition of this facility can be capitalized as part of the cost of the asset. On the other hand, an alternative is the Benchmark treatment, which expenses borrowing costs when incurred. I chose to capitalize the facility, because expenses should follow revenues, in accordance to the matching principle. My facility will not be productive until my long-term research and development projects produce revenues.

FASB ASC 730-10-25-2 Elements of costs shall be identified with research and development activities as follows (see Subtopic 350-50 for guidance related to website development): * a.
Materials, equipment, and facilities. The costs of materials (whether from the entity's normal inventory or acquired specially for research and development activities) and equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses (in research and development projects or otherwise) shall be capitalized as tangible assets when acquired or constructed. The cost of such materials consumed in research and development activities and the depreciation of such equipment or facilities used in those activities are research and development costs. However, the costs of materials, equipment, or facilities that are acquired or constructed for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are research and development costs at the time the costs are incurred. See Topic 360 for guidance related to property, plant, and equipment; the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10 for guidance related to impairment and disposal; and paragraphs 360-10-35-2 through 35-6 for guidance related to
depreciation. 
 * b. Personnel. Salaries, wages, and other related costs of personnel engaged in research and development activities shall be included in research and development costs. 
 * c.
Intangible assets purchased from others. The costs of intangible assets that are purchased from others for use in research and development activities and that have alternative future uses (in research and development projects or otherwise) shall be accounted for in accordance with Topic 350. The amortization of those intangible assets used in research and development activities is a research and development cost. However, the costs of intangibles that are purchased from others for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are research and development costs at the time the costs are
incurred. 
 * d. Contract services. The costs of services performed by others in connection with the research and development activities of an entity, including research and development conducted by others in behalf of the entity, shall be included in research and development costs. 
 * e. Indirect costs. Research and development costs shall include a reasonable allocation of indirect costs. However, general and administrative costs that are not clearly related to research and development activities shall not be included as research and development costs.