Development Cost Capitalization During R&D Races

• 成果类型: Article
• 署名作者: De Waegenaere, Anja; Sansing, Richard C.; Wielhouwer, Jacco L.
• 署名单位: Tilburg University; Tilburg University; Vrije Universiteit Amsterdam
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12306
• 发表日期: 2017
• 页码: 1522-1546
• 关键词: development competition; DEVELOPMENT EXPENDITURES; VALUE RELEVANCE; uncertainty; Intangibles; CHOICE; IMPACT

摘要

We investigate the economic effects of capitalizing development costs during a race between two firms to discover and develop a new technology. Winning the race requires success in the research stage and success in the development stage. Development costs are expensed in some settings, but capitalized in others. Capitalization of development costs provides a credible signal regarding progress in the race, allowing the rival to make a more informed decision regarding whether to proceed with development. We study the effects of this signal on the firms' investment decisions and social welfare. We show that if both firms capitalize instead of expense development costs, aggregate investment in research weakly increases but aggregate investment in development weakly decreases. We also characterize the accounting policies that the two rival firms would adopt if they could freely choose either an expensing policy or a capitalization policy.