Research On Accounting Method For R&D Expense In F Company

F Group in the research is one of the market leaders in one hygenie machine industry, whose main product is baby diaper machines. This industry is famous for high customerization in design area. The supply chain, including both upstream and downstream, are strongly link together for innovation. The leadtime from R&D to final machine available is long. R&D activities happen frequently with large expenditures. In order to keeping the group’s market leading position in response to the fierce and brutal competition, F group sets "innovation" as the mission, and aimed extra added value through it. The company has more than70inventions, more than500patents, the average income of5%for research and development,20percent of headquarters staff services in the R&D department,20new projects in implementation per year. F group also works together with universities, upstream suppliers and downstream customers to promote development of the whole industry.As the operation is complex, F goup’s R&D activities also diversified a lot, which make troubles to both accounting treatment and management control. This paper starts from analyzing the nature of the company’s R&D activities, distinguish them to several types and set accounting treatment separately. For R&D expenditure that qualified as intangible assets conditions, should be capitalized and amortized accordingly; for the R&D activities based on customer orders, reflected in R&D expenditure separately as project execution cost; for R&D activities based on purchasing intentions, reflected in R&D expenditure separately as sales feasibility study; use Activity-Based Costing method, set project number series, allocate R&D expenses according to project beneficiary.Then following is process design and responsibility segregation to support the accounting improvement proposal. The paper states in detail operations, how to utilize ERP system to sturcture and segregate resiponsibility by departments, and design process flow for the needs. Beyond the process, there is also accouting frame designed to fulfill process flow. The accounting frame is integrated in current accounting system, through the segement of company code, cost center, chart of accounting, project number. Key aspects is focused:work order type definition with account code specified leads to different gain/loss subjects; working hours as cost driver will obsorb expense through standard hourly rate setting; use two-step allocation to enhance special cases,1st step is for actual and standard variance,2nd step is for idle hours and expense carried over. By the full set of accouting frame, all business needs is integrated inside.