Greyline , a multinational drug company, announced on Aug 31, 2010 that it had signed agreements to divest itself of drugs to other pharmaceutical firms for a total of $ 1,529 million. The sale resulted fin a pretax gain of $1,416 million. a. Greyline expenses the cost of developing new drugs, rather than capitalizing and amortizing the cost. 

Discuss the effect of the company's choice of accounting method on the income resulting from the announced sales. The income resulting from the announces sales was reported fin 2010, the year of their completion.

 Discuss whether this income was earned in that year or when the drugs were developed?

 Discuss whether the income resulting from the announced sales should be included in earnings used for valuing the company?

Answer rating: 100% (QA)

Greylines choice of expensing the cost of developing new drugs rather than capitalizing and amortizi... View the full answer