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R&D is supposed to be recorded in P&L as OPEX (either as separate line or under SG&A).
There are three major exceptions:
- If a certain R&D project is executed as a service to another Business then it should be captured as COGS
- If some R&D costs relate to Tangible Assets that have an alternative future use, the company can capitalize it by recording it in P&L as as a Fixed Assets and amortized depreciate its cost over the projected lifetime of the developed Product
- If R&D is a critical component of the Business which drives the Sales growth then Financial Management may choose a policy of capitalizing the Development part or even a full-amount of R&D expense and then amortize it over the projected lifetime of the developed Product
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