Opinion ID: 211643
Heading Depth: 3
Heading Rank: 3

Heading: Indefinite Deferral of R&D Expenses

Text: 22 In the Final Results, Commerce refused to allow the indefinite deferral of certain R&D expenses. Hynix argues that this violated section 1677b(f) because its records were verified and deferral is allowed under Korean GAAP and International Accounting Standard 9 (IAS). 12 According to Hynix, the matching principle 13 requires the indefinite deferral of these expenses because associated revenues will not be realized until some time in the future. As evidence, it cites to a single document that notes, almost illegibly, that certain projects will mature sometime in 2001 or 2002. 23 Commerce argues that the matching principle does not apply because there is no objective evidence or reasonable expectation that deferred R&D costs will result in future benefits as required by both Korean GAAP and IAS 9. Remand I at 9. According to Commerce, [a]ccountants defer recognition of an expense to the future only when there is reasonable evidence that the expenditure will, in fact, benefit future operations. If this evidence is not available, or is not convincing, accountants do not attempt to apply the matching principle; rather they charge the expenditure immediately to expense. Id. at 8 (quoting Robert F. Meigs & Walter B. Meigs, Financial Accounting 734 (7th ed.1992)). Pursuant to this approach, Commerce claims that the documentation offered by Hynix is insufficient and, therefore, conservatism mandates expensing these costs. 24 While both Korean GAAP and IAS 9 allow the deferral of R&D expenses, neither standard allows deferral unless certain conditions are satisfied, namely that there be a reasonable expectation of future benefit. Commerce concluded, and we accept, that Hynix offered insufficient evidence that its R&D costs will result in future revenues. See Am. Silicon, 261 F.3d at 1380 (This court `accords deference to the determinations of the agency that turn on complex economic and accounting inquiries.' We hold that determining whether a depreciation practice comports with Brazilian GAAP is one such complex economic and accounting inquiry. (citation omitted)). Because Hynix's records do not comport with the requirements of its home country's GAAP, Commerce need not use them to calculate the duty. The court's decision affirming the disallowance of the indefinite deferral of certain R&D costs is affirmed.