Research On The Effect Of 《CAS6-Intangible Assets》 Accounting Standards

On February 15,2006, the Ministry of Finance published the new accounting standards system containing 1 basic standard and 38 specific standards, among which <CAS6—Intangible assets> made the revision in aspects of intangible assets’ definition, scope of application, accounting treatment and information disclosure, this will have certain influence on the recognition, measurement and disclosure of intangible assets in listed companies. Accounting policy has economic consequences, if the new standards are properly applied, listed companies’accounting behaviors will be reflected in financial reports, affect various stakeholders, especially the investors in the capital markets, and then improving enterprises’ value.The largest part of the changes in CAS6 is the accounting treatment of enterprises’ R&D expenditure. It requires that enterprises reckon study phase’s R&D expenditure in current expenses, capitalize certain conditional development phase of R&D spending and confirm them as intangible assets. This method achieved the convergence with the international standards. The adjustment will improve enterprises’ operating results, motivate their science and technology innovation, strengthen their market competitiveness, whereas give management some space of adjusting profit. The division of R&D phase and the capitalization conditions are both confirmed by accounting personnel’s subjective judgment, so whether R&D capitalization is affected by certain factors and earning management motivation still remains to be empirically tested.Stock price represents enterprises’market value, reflects investors’ attitude towards their future. So examining intangible assets accounting information in CAS6’s value relevance with stock price and whether reflects the real value of intangible assets more accurately, has vital practical significance of verifying new standards’implementation effect. CAS6 changes a lot and covers broader, so through the perspective of value relevance, this thesis studies the relationship between intangible assets accounting information and stock prices, and the usefulness that the information has on investors’ pricing decision.Based on the review of Intangible assets standards’ evolution and related theories, the article firstly studies the financial consequences that impact changes have on listed companies’behavior. On the basis of reviewing existing literature at home and abroad, the article summarize 8 R&D capitalization motives, divides them into earning management factors, operating factors and corporate governance factors, then puts forward hypothesis, builds econometric models and does empirical tests; Secondly the article focuses intangible assets accounting information’s market reactions, adjusts Ohlson basic price model, examines the information content from viewpoints as net intangible assets, amortization of intangible assets and R&D spending, compares the value relevance between intangible assets and tangible nets ones, depreciation and amortization, discusses the market reactions of information on the R&D costs reckoning in intangible assets, the final balance of R&D capitalized spending, capitalized and expensing R&D expenditure, so as to evaluate the system effect of the new guidelines.Through empirical research, this article draws the following conclusion:(1) Listed companies have paid more attention to internal R&D activities, but R&D intensity is not competitive, just achieves basic survival. Firms tend to capitalize R&D expense out of motives as avoiding losses, compensation contracts and delivering R&D signal to the public. Besides, motive of earnings smoothing, equity concentration, debt contracts, political costs and industrial characteristics also affect the capitalization ratio of listed companies.(2) The magnitude of the intangible assets investment activities increased year by year, but the proportion in the total assets is still not high enough, the enterprises’ investment consciousness and the standard of confirming still need to strengthen and perfect. The promulgation of the new rules improves the usefulness of net intangible assets accounting information, whose explanation of share price is better than the net tangible ones.(3) The average amount of amortization rises year by year, from which can be seen that firms tend to choose accelerated amortization methods other than straight-line one since the new rules began, and that amortization has great influence on net income also. Amortization of intangible assets has value relevance, and has less impact on enterprise value deduction compared with similar fixed assets’ depreciation, according to investors.(4) R&D spending reckoned in intangible assets and remains in the end of the term both have positive value relevance, this information has usefulness in investors’decision making. However R&D spending recorded into expenses affects significantly higher than capitalized one, therefore the new guidelines’ requirements on the disclosure of R&D costs, and a reasonable division of research and development phases still need further complete.Based on the above conclusion and analysis, this article put forward the corresponding countermeasures and suggestions:Standard-setting institutions should perfect the current criterion system of intangible assets in the scope of confirmation, accounting items, disclosure requirements and R&D spending capitalization criteria, etc; Enterprises should attaches great importance to intangible asset investment activities, strictly control earning management in R&D spending treatment; Investors should fully understand the intangible assets accounting information, accurately assess enterprise value.