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The FASB, the SEC, and R&D

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  • Bertrand Horwitz
  • Richard Kolodny

Abstract

In 1975 the Financial Accounting Standards Board and the Securities and Exchange Commission banned the deferral (capitalization) method of reporting R&D expenditures for financial statements. The prohibition against deferral mainly affected small companies. To determine whether there was any justification for a concern about the consequent reduction of R&D expenditures, the hypothesis of no decline was tested for a group of 43 small, high technology firms. The hypothesis was rejected. Additional evidence, in the form of responses to a survey of key financial officers of such firms, supports the finding of reduced R&D expenditures.

Suggested Citation

  • Bertrand Horwitz & Richard Kolodny, 1981. "The FASB, the SEC, and R&D," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 249-262, Spring.
    • Handle: RePEc:rje:bellje:v:12:y:1981:i:spring:p:249-262
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    Cited by:

    1. Tony Abrahams & Baljit K. Sidhu, 1998. "The Role of R&D Capitalisations in Firm Valuation and Perfor Mance Measurement," Australian Journal of Management, Australian School of Business, vol. 23(2), pages 169-183, December.
    2. Beatty, Anne & Berger, Philip G. & Magliolo, Joseph, 1995. "Motives for forming research & development financing organizations," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 411-442, April.
    3. Lev, Baruch & Sougiannis, Theodore, 1996. "The capitalization, amortization, and value-relevance of R&D," Journal of Accounting and Economics, Elsevier, vol. 21(1), pages 107-138, February.

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