Why would you allocate COGs to R&D?
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Are you asking why you would want an R&D payment to be characterized as COGS? Without any other info it sounds like a client wants to reduce their BEAT payments
Make margin look better? Take advantage of R&D tax credits?
Unless OP is asking about UNICAP in which case you wouldn’t and would need an adjustment to deferred taxes piece
They may have a standardized costing system that accounts for manufacturing input materials and runs through COGS, and then they back out and allocate based on R&D usage of those input materials. The only person who can say for sure is your client. Talk to them.
GT1 has the most practical response. I have seen a lot of MRPs relieve materials and production expenses for certain lines through R&D, but sometimes development runs are too large and require larger batches than pilot or research lines. the workflow of the accounting system is designated to close out production orders through inventory. When these are written off, inventory adjustment postings are typically run through COGS. Reclassifying these as R&D is appropriate.
It’s for my manufacturing client. I’m having trouble understanding this.
Gonna need more information. Maybe they are following the safe harbor notice for R&D credit and want to juice the amount of the R&D expense publicly disclosed as a result?
You need to find out what the R&D group actually does, what do they spend money on and where the spending is originally booked. I bet if you do that you will be able to answer your own question...which really was does this make any sense?
Sounds like a conversation is needed with your partner or other team lead