Identifying Corporate Expenditures on Intangibles Using GAAP
AbstractThis paper aims to show how firms account for expenditure on their intangible investments and how this influences their decision making processes. Evidence from our survey of 614 large Australian companies show that (1) firms do not systematically identify and separate expenditures on intangible investment from expenditures on tangible investment and operating expenditures; and (2) this leads to an information gap that adversely affects the firm's internal processes for evaluating the decision to invest in intangibles. The paper builds a deductive argument for the use of the general purpose financial reporting system (GAAP) to separate and report the expenditures on intangibles by corporations in a way that is consistent and comparable across firms and over time. Our evidence suggests that investment decisions by management and investors, where intangibles are involved, are likely to be based more on rules-of-thumb than objective evidence.
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Bibliographic InfoPaper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2009n12.
Length: 39 pages
Date of creation: May 2009
Date of revision:
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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
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Web page: http://www.melbourneinstitute.com/
More information through EDIRC
managerial accounting system; GAAP accounting system; expenditures on intangible investment; rate of return;
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-07-11 (Accounting & Auditing)
- NEP-ALL-2009-07-11 (All new papers)
- NEP-BEC-2009-07-11 (Business Economics)
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