The Importance Of Expensing R & D Expenditure

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Some accounting committees and countries prefer expensing the R&D expenditure to capitalization, they concern about the conservatism rule, future economic benefit uncertainty and avoiding profit manipulated of R&D expenditure. However, expensing R&D expenditure also cannot perfectly deal with these problems as they expected. As the rapidly development of technology, especially in high-tech industry, intangible asset take up large number of the overall assets, whether the firm is successful or not largely relay on these intangible assets, therefore, simple expensing all R&D expenditure is apparently inaccurate. One of the most important factors of expensing R&D expenditure is the uncertainty of R&D. The Australian accounting profession’s SAC 4 (1992) refers assets as “future economic benefits, which controlled by the entity as result of past transactions or other past events. And the asset should be recorded in the statement of financial position when the expenditure of the asset can be measured reliably and the future economic benefit generates from the asset is highly likely backflow to the company.” However, it is impossible of a company to accurately measure how possibility of a firm can have future economic benefit generated by the asset. Moreover, the loose concept of control of an asset that is “the capacity of the entity to benefit from the asset in the pursuit of the entity’s objectives and to deny or regulate the access of others to that benefit.” (Walker and

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