Research & Development (R&D)

What is Research & Development?

Research & Development represents all direct and indirect costs associated with the creation and development of new processes, applications, and products. Research & Development shows how much money a company is spending on innovation.

Why is Research & Development important?

Research & Development plays an important role by showing how much money a company is spending to innovate. It can also show how focused a company is on its future, revealing the amount of money spent on new processes, applications, and products.

How is Research & Development calculated?

It’s calculated by including the following expenses:

  • Software
  • Amortization of software
  • Design and development

It excludes:

  • Customer or government sponsored research 
  • For oil, gas, coal, drilling and mining companies, purchase of mineral rights
  • Engineering expense
  • Contributions by government, customers, or other corporations to the company's research and development expenses are excluded if the amount is available.
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