Accounting for Intangibles: Can Capitalization of R&D Improve Investment Efficiency?
This paper investigates the potential for accounting rules to mitigate under‐investment induced by myopic managerial incentives. It exploits the difference within US GAAP requiring the capitalization of some research and development (R&D) costs in software development but proscribing the capitalizat...
| Publicado en: | Abacus Vol. 55; no. 1; pp. 92 - 128 |
|---|---|
| Autores principales: | , , |
| Formato: | Artículo |
| Publicado: |
Wiley-Blackwell
Mar2019
|
| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=hlh&AN=135496778&site=ehost-live header: @attributes: shortDbName: hlh uiTerm: 135496778 longDbName: Humanities International Complete uiTag: AN controlInfo: bkinfo: jinfo: jid: 00013072 AUB jtl: Abacus issn: 00013072 maglogo: Y pubinfo: dt: Mar2019 vid: 55 iid: 1 pid: 480 pub: Wiley-Blackwell artinfo: ui: 135496778 10.1111/abac.12149 ppf: 92 ppct: 36 formats: fmt: – @attributes: type: T – @attributes: type: P size: 297KB tig: atl: Accounting for Intangibles: Can Capitalization of R&D Improve Investment Efficiency? aug: au: Dinh, Tami Sidhu, Baljit K. Yu, Chuan affil: University of St.Gallen University of Sydney University of New South Wales (UNSW), Sydney su: Intangible property Valuation Research & development Accounting standards Computer software development sug: subj: Intangible property Valuation Research & development Accounting standards Computer software development keyword: Capitalization Intangibles Investment efficiency Over‐ and under‐investment Real investment effects Research and development ab: This paper investigates the potential for accounting rules to mitigate under‐investment induced by myopic managerial incentives. It exploits the difference within US GAAP requiring the capitalization of some research and development (R&D) costs in software development but proscribing the capitalization of R&D in other industries. We first investigate whether other hi‐technology firms with no capitalization of R&D costs suffer higher levels of under‐investment in myopic settings relative to software development firms. Second, we investigate whether the capitalization rule assists in mitigating under‐investment within the software development industry, and whether this comes at the cost of over‐investment in the presence of financial flexibility. Our findings are consistent with the mitigation of under‐investment in the software development setting but we find no evidence of over‐investment in the presence of high financial flexibility. Other hi‐tech firms that cannot capitalize R&D costs suffer higher levels of under‐investment relative to software development firms. Finally, we find that the ability to capitalize for the sample of software firms does reduce the probability of cutting R&D investment when managers are under earnings pressure. The findings in this paper are relevant to standard setters seeking to understand the costs imposed by (understandably) conservative accounting rules, and how verification of points of feasibility alongside less conservative accounting can prevent dysfunctional investment outcomes. This is the first study to consider whether the ability to (justifiably) capitalize the costs of internally generated intangibles can improve investment efficiency (the allocation of resources). pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: Y custom: Copyright of Abacus is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. item: Abacus holder: Wiley-Blackwell dt: @attributes: year: 2019 holdings: @attributes: islocal: N |
|---|