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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- Leonard I. Nakamura, 2008. "Intangible assets and national income accounting," Working Papers 08-23, Federal Reserve Bank of Philadelphia.
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