Atallah, Gamal and Khazabi, Massouid (2004): A model of R&D capitalization. Published in: International Journal of Business and Economics , Vol. Vol. 4, No. No. 2 (April 2005): pp. 107-121.
Download (164kB) | Preview
This paper studies the decision of firms to expense or capitalize R&D expenditures. The firm has an incentive to mismatch the benefits and costs of R&D, expensing a larger portion of R&D when the benefits occur in the long-run and capitalizing a larger portion when the benefits occur in the short-run. There is strategic substitutability between R&D investments and expensing. Accounting standards, market evaluation of capitalization, and firms’ accounting policies can have real effects on innovation.
|Item Type:||MPRA Paper|
|Original Title:||A model of R&D capitalization|
|Keywords:||Innovation; Expensing; Capitalization; Accounting standards|
|Subjects:||M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm
O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D
|Depositing User:||Massoud Khazabi|
|Date Deposited:||17. Jun 2012 00:16|
|Last Modified:||07. Sep 2015 17:42|
Baber, W. R., P. M. Fairfield, and J. A. Haggard, (1991), “The Effect of Concern about Reported Income on Discretionary Spending Decisions: The Case of Research and Development,” The Accounting Review, 66(4), 818-829.
Callimaci, A. and S. Landry, (2003), “The Effect of Management Incentives and Cross-Listing Status on the Accounting Treatment of R&D Spending,” The Journal of International Accounting, Audit and Taxation, 12(2), 131-152.
Cazavan-Jeny, A. and T. Jeanjean, (2003), “Value Relevance of R&D Reporting: A Signaling Interpretation,” ESSEC Working Papers No. DR03021, ESSEC Research Center, ESSEC Business School.
Ding, Y., G. Entwistle, and H. Stolowy, (2003), “International Differences in R&D Disclosure Practices: Evidence in a French and Canadian Context,” Les Cahiers de Recherche No. 783, Groupe HEC.
Guellec, D. and B. van Pottelsberghe de la Potterie, (1997), “Does Government Support Stimulate Private R&D?” OECD Economic Studies, 29(2), 95-122.
Elliott, J., G. Richardson, T. Dyckman, and R. Dukes, (1984), “The Impact of SFAS No. 2 on Firm Expenditures in Research and Development: Replications and Extensions,” Journal of Accounting Research, 22, 85-102.
Entwistle, G. M., (1999), “Exploring the R&D Disclosure Environment,”Accounting Horizons, 13(4), 323-341.
Horwitz, B. and R. Kolodny, (1980), “The Economic Effects of Involuntary Uniformity in the Financial Reporting of Research and Development Expenditures,” Journal of Accounting Research Supplement, 18, 38-74.
International Accounting Standard Committee, (1998), Standard No. 38: Intangible Assets, IASC, London.
Linhart, P. B., J. L. Lebowitz, and F. W. Sinden, (1974), “The Choice between Capitalizing and Expensing under Rate Regulation,” The Bell Journal of Economics and Management Science, 5(2), 406-419.
Markoff, J., (1990), “A Corporate Lag in Research Funds is Causing Worry,” The New York Times, 139, January 23, A1, D6.
Mulkay, B., B. H. Hall, and J. Mairesse, (2000), “Firm Level Investment and R&D in France and the United States: A Comparison,” NBER Working Paper No. 8038.
Palepu, K. G., P. M. Healy, and V. L. Bernard, (2000), Business Analysis and Valuation: Using Financial Statements, South-Western College Publishing, Cincinnati, Ohio.
Schankerman, M., (1981), “The Effects of Double-Counting and Expensing on the Measured Returns to R&D,” Review of Economics and Statistics, 63(3), 454-458.