An Analysis of Methods Used in Accounting for R&D Costs

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  • Yoshii Takamitsu
    Doctoral Student, Graduate School of Business Sciences, Tsukuba University

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  • 研究開発投資の会計処理に関する一考察
  • ケンキュウ カイハツ トウシ ノ カイケイ ショリ ニ カンスル イチ コウサツ

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<p>While U.S. GAAP and Japanese accounting standards mandate that firms fully expense R&D costs when they are incurred, International Financial Reporting Standards (IFRS) allow partial capitalization of R&D costs. The companies in Japan to which IFRS applies presumably capitalize of R&D costs.</p><p>This study therefore investigated the suitability of accounting treatment for R&D costs for each industry using an empirical analysis of data from Japanese companies. The results suggest expensing of R&D costs in the chemicals, machinery, and precision instruments industries, and partial capitalization of R&D costs in the pharmaceuticals, automobiles, and electric machinery industries. I infer that the proportion of R&D costs being eligible for capitalization is higherin pharmaceuticals, automobiles, and electric machinery industries than in other industries.</p>

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