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Identifying Corporate Expenditures on Intangibles Using GAAP


  • L. C. Hunter

    (Intellectual Property Research Institute of Australia, The University of Melbourne and School of Business and Management, University of Glasgow)

  • Elizabeth Webster

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Anne Wyatt

    (UQ Business School, University of Queensland)


This 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.

Suggested Citation

  • L. C. Hunter & Elizabeth Webster & Anne Wyatt, 2009. "Identifying Corporate Expenditures on Intangibles Using GAAP," Melbourne Institute Working Paper Series wp2009n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2009n12

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    References listed on IDEAS

    1. Clarkson, Peter M & Thompson, Rex, 1990. " Empirical Estimates of Beta When Investors Face Estimation Risk," Journal of Finance, American Finance Association, vol. 45(2), pages 431-453, June.
    2. MartinNeil Baily & Robert Z. Lawrence, 2001. "Do We Have a New E-conomy?," American Economic Review, American Economic Association, vol. 91(2), pages 308-312, May.
    3. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    4. Stefano Brusoni & Orietta Marsili & Ammon Salter, 2005. "The role of codified sources of knowledge in innovation: Empirical evidence from Dutch manufacturing," Journal of Evolutionary Economics, Springer, vol. 15(2), pages 211-231, January.
    5. repec:bla:joares:v:37:y:1999:i:2:p:387-413 is not listed on IDEAS
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    Cited by:

    1. James R. Frederickson & Elizabeth Webster & Ian O. Williamson, 2010. "Is the Current Accounting Treatment of Education and Training Costs Appropriate?," Australian Accounting Review, CPA Australia, vol. 20(3), pages 265-273, September.

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    managerial accounting system; GAAP accounting system; expenditures on intangible investment; rate of return;

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