R&D Expenses Capitalized Influencing Factors

After the promulgation of the new accounting standards in2006,China hasstepped up efforts to the disclosure of R&D expenses, and research anddevelopment costs to implement conditional capitalization. Accounting Standards ofR&D expenses are divided into research and development phases, the costs ofresearch phase directly through profit or loss, the cost of the development phase tothe implementation of the conditional capital. The "development expenditure"subjects are increased in the balance sheet, Occurs when development costs,development costs are included in "development expenditure" subjects, Costs noteligible for capitalization at the end of the year transferred to profit or loss fromdevelopment expenditure, Eligible for capitalization accumulation of part of thedevelopment expenditure, Development success into intangible assets subject, Thedevelopment failure disposable transferred to profit or loss. The objective of theguidelines to improve the company’s financial indicators and operating conditions.However, China’s accounting standards are not strict and detailed inimplementing provisions, The proportion of listed companies to disclose R&Dexpenses is not high, Disclosure of R&D expenses are not standardized, theaccounting treatment of R&D costs more dependent on the judgment of theenterprise itself. Therefore, we must understand the existence of incentives tomanage earnings by corporate management in determining the level of capitalizationof R&D expenses, and by which the combined effect of the factors.To avoid interference IDM factors, Select Shanghai and Shenzhen R&Dexpenses in2010and2011, more disclosure of the information technology industryand the bio-pharmaceutical industry, a strong research and development efforts, asthe scope of our study, Based on three assumptions (debt covenants assumptions, thecompensation contract assumptions and political cost assumptions) and thetransmission of information theory, regression analysis of their research anddevelopment costs capitalized factors on the level of capitalization of the accountingpolicy choice. The study found that R&D costs capitalized behavior by debtcovenants and political costs. Debt covenants affect the performance of the higherfinancial leverage, the higher the intensity of the capitalization, at the same time, wealso found that we have chosen these two industries, the short-term asset-liabilityratio is more than the asset-liability ratio of the model explain the force, which may be affected by the IDM factors influence; The impact of the political costs expressedas the higher the level of profitability of the enterprise, the lower the intensity ofcapital, weak political costs of enterprise-scale; In addition, the enterprises have thebehavior of research and development costs capitalized losses accounting policychoices, and there is weak evidence to show that there is a smooth profit motive.Listed companies in China by the conclusion shows the existence of themotivation of the research and development costs capitalized in accounting policychoice to manage earnings. Thus, for corporate earnings management behavior, weproposed the following recommendations: Distinguish from the operation of theresearch and development phases; establish a correlation between the R&D-relateddata to the disclosure; perfect the guidelines for the implementation of the R&Dexpenses capitalized; expand R&D costs capitalized; increased research anddevelopment expenses related contentthe disclosure.