The Effect Of Research&Development Expenditure Capitalization On The Innovation Capacity Of Enterprise

With the development of science,technology and productivity,the world has entered the era of knowledge economy,in which knowledge operating is the mode of economic growth.In this era,innovation is very important for enterprises and the country.It can help countries and enterprises to form the core competitiveness in the fierce competition.Enterprises are the main body of innovation activities of market economy.Innovation is the enterprise survival and development need.In order to improve the output of innovation,companies continue to increase the input of innovation and focus on innovation activities now.Innovation has become the main part of the business activities.R&D activities are the regular activities of modern enterprises.The huge R&D investment and related expenses of R&D of innovation activities become recurrent expenditures for enterprises.To fairly record business activities and express the enterprise' value,the Ministry of Finance issued new accounting standards in 2006.According to the new standards,provision 6:the expenditures incurred in development phase of internal research and development projects,should be capitalized when satisfying the all five specified conditions.This provision aims to encourage enterprises to develop intangible assets on their own,and enhance the innovation capability and market competitiveness,in order to get rid of the extensive growth and over-reliance on the introduction of foreign technology.Does the implementation of the provision achieve the desired results?Does enterprise innovation capability promote after its implements?This is what this paper is discussing.There are seven chapters in this paper.Chapter 1,introduction.This part analyzes the changes in the environment of the accounting.These changes require accounting should truly reflect the corporate R&D activities.In order to achieve the requirements of accounting information quality,R&D expenditure accounting approach has been improved in the new standard.This paper discusses the effect of R&D expenditure capitalization on enterprises' innovation capacity with the empirical method.Chapter 2,the literature review.This part introduces domestic and fpreign researches on R&D expenditure and innovative and analyzes related research.It can be found the empirical researches on capitalizing or expensing of R&D expenditure analyze from the direction of the value-relevance of different accounting methods.Researches which combined the accounting treatment with enterprises' innovation ability are less.Chapter 3,to overview theory of innovation,R&D expenditure and economic consequences,and put forward research hypotheses.Innovation is a long-term investment with greater uncertainty.Innovation capacity consists of innovation inputs capacity,the research and development capacity,output capacity,organization and management ability.Innovation capacity is influenced by other factors such as inadequate investment,etc.R&D is the main forms of innovation in a company;the uncertainty of its future earnings brings problems to accounting.Expensing or capitalizing is the focus of R&D expenditure research.The new standards take the "conditional" capitalization as accounting treatment to enhance their innovation capability.Implementation of the new standards requires the enterprises to carry out the accounting policy choice.The accounting policy choice causes economic consequences.According to the related theoretical analysis,the paper put forward research hypotheses.Chapter 4,the empirical design of the effect of R&D expenditures capitalization on enterprises' innovation capacity.After the collection of relevant data for 2004 to 2010,this paper calculates the value of the innovation capacity of the sample enterprises;then selects the linear regression model to analyze the data of innovative capacity and R&D expenditures capitalization.Chapter 5,the empirical analysis.In accordance with the empirical design,this chapter does descriptive statistics of the variables,calculates Pearson correlation coefficient of the variables and tests co-linearity of the variables.After these tests,this paper does linear regression for variables.The regression result shows that the enterprises' innovation capacity is improved after the implementation of "conditional" accounting policy.But the R&D expenditures capitalization intensity can not be used to indicate the enterprises' innovation capacity.That results from the deviation in professional judgment in the practical operation and corporate R&D expenditure accounting treatment preferences.Chapter 6,conclusions and recommendations.The empirical results show that,compare to the expensing accounting approach,"conditional" capital has promoted enterprise innovation capability.There is a deviation in accounting professional judgment.So in order to improve accountancy professional judgment and R&D expenditures accounting information quality,this paper proposes to improve the accounting standards of operability and increase the accountants' professional level.Chapter 7,Summary.Summarize this paper's contribution and deficiencies.Through empirical analysis,this paper found that(1)after the implementation of the "conditional" capitalization,innovative capacity has improved.(2)There is no significant linear relationship between R&D expenditures capitalization intensity and business innovation capacity.The reasons for this are the deviation in accounting judgments and accounting selection preferences.The deficiency of this paper results from the measure index system of enterprises' innovation capacity is not comprehensive.