Controller's Guide to Planning and Controlling Operations

6

PLANNING AND CONTROL OF RESEARCH AND DEVELOPMENT EXPENSES

RESEARCH AND DEVELOPMENT ACTIVITIES

The terms research and development are often used imprecisely. Each may have a myriad of connotations, and even though these two words often are used together, each represents a different process with differing implications in terms of planning and control. Research as used herein relates to those activities in a business enterprise that are directed to a search for new facts, or new applications of accepted facts, or possibly new interpretations of available information, primarily as related to the physical sciences. It is the activities or functions undertaken, often in the laboratory, to discover new products or processes. Development, however, as discussed herein, denotes those activities that attempt to place on a commercial basis that knowledge gained from research. In another sense, the efforts discussed in this chapter are those that normally would be managed by the vice president or director of research and development (R&D).

Although R&D activities may be grouped in any number of ways—and proper classification is important in the planning and control function—this segregation is often used internally by those entities that do extensive work in these three areas:

1. Basic or fundamental research. This may be defined as investigation for the advancement of scientific knowledge that does not have any specific commercial objective. It may or may not be, in fields of present, or of ...