Accounting for preproduction costs related to long-term supply arrangements

 Nature of pre production costs related to long-term supply arrangements

US GAAP distinguishes two kinds of preproduction costs related to long-term supply arrangements:

• Costs of design and development of products
• Costs of design and development of molds, dies, and other tools

Molds, dies, and other tools can be owned by the customer or by the supplier. So, the second category noted above can have the following subcategories:

• Costs of design and development of molds, dies, and other tools owned by the supplier
• Costs of design and development of molds, dies, and other tools not owned by the supplier

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