On Capitalization Of R&D Expenditure And Earnings Management In Pharmaceutical Enterprises

Due to the large base and continuous growth of China's population,the deepening degree of the aging population and the implementation of medical-health reform,the pharmaceutical industry which is an important part of the national economy has made considerable progress in recent years.With the introduction of the "healthy China" concept and the successive implementation of policies related to medical reform,research and development,production and circulation,the technological innovation and quality upgrading of the entire pharmaceutical industry will be further enhanced,which will certainly lead the future development direction of the entire pharmaceutical industry.It also has a profound impact on social innovation.As the pharmaceutical industry as a whole enters a new stage of steady growth,the performance of various pharmaceutical companies has increased while their R&D investment has also increased rapidly.The substantial increase in R&D investment in pharmaceutical companies is related to the high investment,long cycle,high risk and uncertain income of pharmaceutical companies' research and development.Empirical research indicates that the phenomenon of earnings management in the pharmaceutical industry is widespread,and the accounting management space itself has the objective conditions for earnings management.The use of conditional capitalization of research and development expenditures to manage earnings accounting operations is one of the more commonly used earnings management methods for pharmaceutical companies.In 2018,the outbreak of many incidents in China's pharmaceutical industry pushed generic drugs,biological agents and the entire pharmaceutical industry to the commanding heights of public opinion.The research on the pharmaceutical industry began to become a hot spot.This paper selects Hisun Pharmaceutical Co.,Ltd.,a listed company in China's pharmaceutical industry,as the research object.The purpose is to help investors to effectively identify the motives and means of earnings management of pharmaceutical companies using R&D expenditure capitalization through research on Hisun Pharmaceutical.Case study of earnings management in the pharmaceutical industry.Hisun Pharmaceutical Co.Ltd.is a state-owned and old-fashioned comprehensive pharmaceutical company.In 2015,due to factors such as the special ruling and the overseas sales ban,its profitability declined and its performance indicators continued to fall.The management of Hisun Pharmaceutical hopes to strengthen its independent core R&D to form its own core competitiveness,so as to improve its self-profitability and realize the transformation and upgrading of the company.By collating and analyzing Hisun Pharmaceutical's 2012-2017 annual report and other relevant data,it is found that it does have the use of R&D expenditure capitalization to implement earnings management.In order to avoid the motives of special treatment,refinancing and debt covenants,Hisun Pharmaceutical has capitalized a large number of R&D expenditures that should be expensed by capitalizing the R&D expenditures,and included in the development.Expenditure account.From 2015 to 2017,the net profit fell sharply but continued to achieve meager profit.However,the net profit after deducting non-recurring gains and losses was negative for three consecutive years.Under the premise of beautifying the current net profit,it does not excessively distort the earnings information and has a negative impact on investors,so it is a moderate earnings management behavior.Through the analysis of Hisun Pharmaceutical's earnings management,the author suggests that accounting standards makers can further improve relevant accounting standards,and corporate management and stakeholders can transform the inherent concept of corporate value assessment.External supervisory agencies and external investors should strengthen Supervision and joint maintenance of a good market order,thereby avoiding more companies to adopt excessive earnings management or profit manipulation to harm the interests of investors.The purpose of this study is to enrich the case study of earnings management of pharmaceutical companies using capitalization of R&D expenditures,and to help investors more effectively identify the motivations and means for the management of pharmaceutical companies to use R&D expenditures for earnings management.The highlight of this paper is to analyze the motivation of Hisun Pharmaceutical for earnings management from multiple angles,rather than just limiting the conventional profit adjustment and avoiding continuous losses.The shortcoming of the study is that the earnings management model is not used to measure the degree of earnings management,and it is hoped that it will be gradually improved in subsequent research.