Question
Refer to Ciscos financial statements and footnotes, as well as the relevant GAAP guidance, to answer these questions relating to research and development. a. What
Refer to Ciscos financial statements and footnotes, as well as the relevant GAAP guidance, to answer these questions relating to research and development.
a. What is the appropriate U.S. GAAP treatment for internal research and development expenditures? In your respons e, refer to the rele vant section of the Codification. Does Cisco adhere to that guidance? How do you know?
b. What is the appropriate accounting treatme nt for internally generated software development costs? In your response, refer to the relevant section of the Codification. Does Cisco adhere to that guidance? How do you know?
c. For each of the fiscal years ending July 27, 2013, July 28, 2012 and July 30, 2011, provide the following:
i. Total R&D expense
ii. Total R&D expense Total revenues
iii. Total R&D expense Total operating expenses
iv. Total R&D expense Purchased intangi bles, gross (for purposes of this calculation, Purchased intangibles, gr oss as of July 30, 2011 were $4,539)
d. Comment on the trend in R&D expense in dollars and related ratios reported in part c of this question. Does Cisco a ppear to be maintaining, increasing or decreasing its investment in R& D activity over this period?
e. In following U.S. GAAP, Ciscos balance sheet does not include an intangible asset for the value created by internally -generated research and development costs. Describe how investors might us e the information in part c of this question to gain insights about changes in the value of Ciscos technology andPage other value that might be created by i nvestments in research and development activities.
f. Included in Purchased Intangible Assets recognized by Cisco is In-process research and development. Describe what these costs represent and discuss the accounting treatment. Refer to the appr opriate codificati on section in your response.
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