2025 Life Sciences Industry Accounting Guide

By Jeff Ellis, Audit & Assurance Partner and US & Global Life Sciences Audit & Assurance Leader, Deloitte & Touche LLP, and Dennis Howell, Audit & Assurance Partner and Senior Consultation Partner, Deloitte & Touche LLP

Talking points                                                                                                  

• Recent regulatory and accounting standards updates have impacted financial reporting in the diverse and dynamic life sciences industry. 
• The 2025 Life Sciences Industry Accounting Guide offers updated guidance and examples that address these developments.
  
• This year’s life sciences accounting guide provides answers to today’s pressing questions from accounting professionals in the life sciences industry.

The life sciences industry is all about innovation and evolution. It’s not just the cutting-edge research and technology that’s evolving, but also the regulatory environment and accounting standards. Many of the life sciences accounting professionals we chat with are looking for guidance to navigate this ever-shifting landscape.

To help meet these needs, Deloitte recently released the 2025 Life Sciences Industry Accounting Guide, a reference guide for life sciences reporting and accounting teams. This updated edition is an essential resource for life sciences industry accounting teams. With examples, interpretive guidance, and the latest standard-setting and rulemaking developments, it serves as a roadmap for professionals navigating change in 2025.

Keep reading for some of the key updates you should know, and be sure to download the 2025 guide for reference.

Research and development (R&D)

As R&D in the life sciences industry becomes more complex and innovation is fueled by M&A activity, their related accounting requirements require careful consideration. With a new proposed standard on R&D funding arrangements, new types of costs incurred to perform R&D, and expected increases in M&A, the 2025 guide can help accounting teams as they navigate changing regulations and market conditions.

• Software used for R&D activities: This new section compares the costs of internally developed software to be used in R&D activities with the costs of purchased software to be used in R&D.
  
• Cost examples: The guide includes updated examples to help you better understand how to apply the accounting standards.
  
• Acquisition guidance: Updates include reminders about the SEC’s definition of a business and new guidance on intangible assets.

Revenue recognition

Life sciences accounting teams should understand the accounting consequences for complex revenue arrangements. The 2025 guide reviews emerging types of revenue contracts and highlights recent US Securities and Exchange Commission (SEC) comment letter themes.

• Impact of contractual provisions in license arrangements: The guide provides a real-world example for determining whether contractual provisions represent attributes of a license or additional rights.
  
• Collaborative and multi-element arrangements: Updates include SEC comment letter trends for complex arrangements common in the life sciences industry.

Initial public offerings (IPOs)

Between 2019 and 2024, a remarkable 43% of all IPOs were in the life sciences industry.¹ IPOs are clearly a driving force in the industry, and the 2025 guide offers insights for accounting professionals dealing with current or potential transactions.

• SEC considerations: This year’s guide incorporates discussion on a variety of SEC views related to voluntary submissions of draft registration statements, the accounting for offering costs, the classification of outstanding financial instruments, and required predecessor information after an acquisition.
  
• Fair-value-based measurement: We’ve highlighted FinREC’s announced release of two revised chapters expected to be included in the next AICPA Accounting and Valuation Guide of Privately-Held-Company Equity Securities Issued as Compensation.

Emerging issues

The updated guide also examines other accounting and financial reporting hot topics involving new or proposed accounting standards. They include:

• Accounting for developing generative artificial intelligence (GenAI) applications.
• Corporate Sustainability Reporting Directive (CSRD) reporting.
  
• Segment reporting.
  
• Disaggregation of income statement expenses.

What role can Deloitte play?

Deloitte knows that accounting in life sciences is always evolving. As new challenges arise and business priorities shift, our 2025 Life Sciences Industry Accounting Guide provides guidance that finance organizations can use to help address the financial reporting issues they face. Download the full 2025 guide or explore individual sections. And don’t hesitate to reach out to us with any thoughts or questions.

¹ Deloitte, Life Sciences Industry Accounting Guide, March 2025.