Is it time for a new accounting of R&D costs?

The mismatch between today's "high-tech economy" and the double-entry accounting system has raised serious questions about the quality of earnings. The Securities and Exchange Commission (SEC) has targeted overly aggressive earnings management, focusing on acquired in-process research...

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Bibliographic Details
Published in:Strategic finance (Montvale, N.J.) N.J.), 2001-08, Vol.83 (2), p.50
Main Authors: Clem, Anne M, Jeffrey, Cynthia G
Format: Magazinearticle
Language:English
Subjects:
Accounting systems
Acquisitions & mergers
Annual reports
Asset acquisitions
Biotechnology industry
Business combinations
Computer simulation
Earnings management
Fair market value
FASB statements
Financial accounting standards
Financial reporting
Intangible assets
Medical equipment
Proposals
R&D
Research & development
Research & development expenditures
Startups
Useful life
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Summary:The mismatch between today's "high-tech economy" and the double-entry accounting system has raised serious questions about the quality of earnings. The Securities and Exchange Commission (SEC) has targeted overly aggressive earnings management, focusing on acquired in-process research and development (IPR&D). Some people are concerned that the SEC crackdown on IPR&D valuations has the potential to slow the pace of mergers and acquisitions significantly, hamper the formation of new companies, and decrease the value of a company's stock. Financial managers on either side of the debate will need a clear understanding of the issues when evaluating potential acquisitions.
ISSN:1524-833X