Scientific Laboratories, Inc., is contemplating a sale of the business to an unrelated third party. During the current year, Scientific has incurred substantial amounts of research and development (R&D) costs related to some drugs with a very high probability of future success.
Scientific’s managers are negotiating the sale prior to the issuance of the current year’s financial statements, and they have decided to capitalize the current year’s R&D costs since they are part of the negotiated selling price. The potential buyer however disagrees and informs Scientific that such R&D costs should not be capitalized. 

Required: 

Utilize the FASB’s Codification to write a report on the proper accounting for R&D costs. Provide specific Codification references.