Recognition Of R&D Expenses And Earnings Management In Pharmaceutical Manufacturing Enterprises

The new accounting standards issued by the Ministry of Finance on 2006 adopt a conditional capitalization approach to internal R&D expenses.However,the new guidelines are too principled to describe the division of the research and development phases and the conditions for capitalization,and their implementation have to depend on the professional judgement of the personnel concerned,which provides the management with great space for policy options.At the same time,the supervision of the management lacks the concrete judgment basis,which provides the management with the opportunity to carry out earnings management through cost capitalization,which will seriously reduce the credibility of the financial statements.As a typical enterprise with high R&D investment,the pharmaceutical manufacturing enterprises` choice of accounting policies for internal development expenditure has a great impact on the company's business performance.At the same time,the characteristics of large investment,long period and high risk in the R&D projects of pharmaceutical manufacturing enterprises determine that the profits of this industry fluctuate greatly,which means that there is a greater demand for earnings management in the pharmaceutical industry.Thus,it is of great significance to study the recognition of R&D expenses and earnings management in pharmaceutical manufacturing enterprises.Based on the theory of earnings management motivation and relevant regulations of standards,this paper analyzed the motive of earnings management,the rationality of accounting choice of R&D expenditure,and the details of information disclosure of R&D project of Haizheng Company,find that Haizheng Pharmaceutical Company has the behavior of using the accounting choice of R&D expenditure to carry out earnings management.And this behavior is caused by the partial capitalization of R&D expenditure rules,which give enterprises too much subjective judgment space and the imperfection of information disclosure regulations in R&D projects.In order to improve the quality of accounting information of pharmaceutical enterprises and reduce the occurrence of earnings management behavior,it is necessary to formulate the secondlevel reference clause of capitalization of R&D expenses of pharmaceutical enterprises.Therefore,based on the success rate of drug development in various stages,from the angle of accounting prudence principle and external verifiability,this paper puts forward the suggestion of the second level reference clause,that is,the starting point of capitalization of chemical generic drugs is the time to obtain clinical trial approval,the starting point of capitalization of chemical innovative drugs is the same as the capitalization of biological drugs,which is the time to obtain Clinical Summary Report;The capitalization starting point of generic Chinese medicine should not be earlier than the time point of entering the stage of production declaration,and the R&D expenditure of innovative Chinese medicine should be included in the profit and loss of the current period.In addition,in view of the problem of R&D information disclosure,this paper suggests that pharmaceutical enterprises should disclose the starting point of the development stage and capitalization of innovative and generic drugs,unify the disclosure standards,strictly follow the principle of importance,increase the disclosure of capitalization rate of R&D expenditure and the influence of R&D expenditure accounting choice on current profit,increase the disclosure of the R&D expenses,capitalization of R&D expenditure and the capitalization rate of R&D expenditure in recent three years.