Research On The Motives Of Capitalization Of R&D Expenses And Its Information Content Of Accounting

Corporate R&D capability is within the power company's future growth, more and more companies began to focus on R&D investment, R&D has become a key factor for investors to determine the company's value and future. R&D spending has three accounting methods to disclosure: full expensed, full capitalized and conditional capitalized worldwide. Before 2006, China used full expensed method. In 2006, China issued new accounting standards, allowing companies to recognize the expenditures in development stage as intangible assets. This paper took this changes in the criteria as the opportunity to conduct a research on the R&D disclosure condition of biomedical and electronic information industry in the capital markets. It firstly conducted the research to find out the motives of their disclosure on capitalized R&D expensed from the aspect of the size of the company, profit targets, market risk, total R&D efforts. It got the conclusion that company owned more R&D ability will capitalized their R&D expensed more. Futhermore, while R & D expenses capitalization will be used for profit cosmetic act, but companies will not take the debt covenants and political costs into consideration. Secondly, this paper used empirical research methods, refered to Fehham-Ohlso model, to conduct in-depth analysis of the accounting information of capitalization of R & D expenses. It got the conclusion that the capitalization portion of R&D expenses will improve the information content of accounting in capital markets.