Capitalizing R&D Expenditures
AbstractThe next international version of the System of National Accounts will recommend that R&D (Research and Development) expenditures be capitalized instead of being immediately expensed as in the present System of National Accounts 1993. An R&D project creates a new technology, which in principle does not depreciate like a reproducible asset. A new technology is however subject to obsolescence, which acts in a manner that is somewhat similar to depreciation. The paper looks at the net benefits of an R&D project in the context of a very simple intertemporal general equilibrium model and suggests that R&D expenditures be amortized using the matching principle that has been developed in the accounting literature to match the fixed costs of a project to a stream of future benefits. Of particular interest is the evaluation of the net benefits of a publicly funded project where the results are made freely available to the public.
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Bibliographic InfoPaper provided by Vancouver School of Economics in its series Economics working papers with number diewert-08-01-18-09-24-04.
Length: 29 pages
Date of creation: 18 Jan 2008
Date of revision: 18 Jan 2008
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Web page: http://www.economics.ubc.ca/
Cost benefit analysis; R&D project; intertemporal general equilibrium theory; money metric utility scaling; matching principle; amortization; deprecia;
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- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
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- D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ACC-2008-01-26 (Accounting & Auditing)
- NEP-ALL-2008-01-26 (All new papers)
- NEP-INO-2008-01-26 (Innovation)
- NEP-IPR-2008-01-26 (Intellectual Property Rights)
- NEP-PPM-2008-01-26 (Project, Program & Portfolio Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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