Acct 712 James De La Torre Professor Neal B. Hitzig Case 09-2 Pharmagen 1. Since there is no obligation to the nonrefundable repayment of the $500 million of funding and Pharma retains intellectual rights (no financial risk for Pharma as per ASC 730-20-25-4)‚ it can be seen as a Research and Development and expensed as incurred according to ASC 730-20-35-1 because no future service can be made. The funding for product X is specified by the investor to be used only for R&D of
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In this situation I would argue that ASC 730-20 is applicable. Pharmagen is entering into an agreement with PEI (investors) on a contractual basis to provide services and an option to acquire the results of the R&D (FASB 68). Pharmagen retains all ownership rights to the development of X. It also states that in R&D arrangements the entity (in this case Pharmagen) usually has an option to either purchase the partnership’s interest (PEI) or to obtain the exclusive rights to the entire results in
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Case No. 2: Pharmagen Pharmaceutical Development Funding According to the Accounting Standards Codification‚ the funding arrangement between Pharmagen (Pharma) and the private equity investor (PEI) would be applicable under the Research and Development Arrangements standard (ASC 730-20). This standard provides guidance for entities that are entered into a research and development (R&D) arrangement who acquire the results of research and development through the entire or partial funding by others
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Trueblood Case 9-2: Pharmagen 1. State the issue at hand. (Typically this is merely the question you are asked at the end of the case.) How to account for the funding of the R&D and royalty payments 2. State the fact pattern. BRIEFLY present the relevant facts. (Bullet points can be very useful here.) (This can be a challenge‚ given that some Trueblood cases are only a few paragraphs long‚ it can be hard to further summarize them.) • Pharmagen entered into a funding agreement with Company XYZ
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future royalties from Pharmagen‚ even if product “X” is not successfully completed and developed. Further‚ based ASC 730-20-05-3 through 6‚ Pharmagen has incurred a liability‚ and has promised to repay this loan using future revenues from either or both product “X” and “Y”‚ regardless of the outcome of product “X”. There are also no financial risks transferred over to PEI‚ as they would be paid no matter what the result of product “X”. 2. Another factor is that Pharmagen is also partially financing
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that guidance. Facts: Pharmagen is a pharmaceutical company Company XYZ is an unrelated third-party private equity investor with no prior relationship or business operations related to Pharmagen Pharmagen and Company XYZ have entered into a funding agreement The agreement states Pharmagen will receive up to $500 million funding for R&D costs as they are incurred solely for the research efforts of a potential new drug “X” Any funding received is non-refundable and Pharmagen is not obligated to successfully
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No. 29‚ Accounting for Nonmonetary Transactions (Opinion 29) ASC 840: FASB Statement No. 13‚ Accounting for Leases (Statement 13) FASB Technical Bulletin No. 88-1‚ Issues Relating to Accounting for Leases (Technical Bulletin 88-1) 09-2 Pharmagen . Answer the questions that are given below‚ not as given in the case text. Applicable Professional Pronouncements •ASC 470-10-25-1 through 25-2‚ Debt: Overall: Recognition (EITF Issue No. 88-18‚“Sales of Future Revenues” (Issue 88-18)) •ASC
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Pharmagen Pharmaceutical Development Funding Overview of the case: Pharmagen‚ a pharmaceutical company entered into a funding agreement with an unrelated third-party private equity investor (PEI). As part of the Agreement‚ the company will receive up to a total of $500 million from the PEI for R&D costs incurred by the development of a potential new drug X only. If at any time the project is scrapped the amount received by Pharmagen is non-refundable. Pharmagen retains all the intellectual
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Addenda Summary-2011 Note: Due to the issuance of certain new accounting literature‚ changes in the status of ongoing projects during the past year‚ or evolution of practice‚ the following updates to the existing cases should be noted. Case 03-5a Part I: Trademark Subsequent to the release of the Exposure Draft issued by the FASB and IASB in June 2010 the Boards received a number of comments and is currently reviewing and analyzing these comments. A revised draft of the Exposure Draft is expected
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PRESENTATION ANALYSIS AND INTERPRETATION OF DATA Major Therapeutic Categories Antibiotics‚ vitamins and analgesics are the top three therapeutic classes in terms of sales by value. Anti-biotic dominate the market with approximately 24% of the market value. Vitamins and analgesics account for 6.6% and 6% of the market respectively. The vitamins and antibiotics sectors are vital not only because of their large size but also because of their astronomical growth. Sales of antibiotics are growing
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