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Accounting for R&D Investments According to IAS 38

And the Conflicting Forces that Shape Financial Accounting: An Empirical Analysis

Series:

Michael Ordosch

The thesis empirically investigates two conflicting views on the accounting treatment of R&D outlays according to IAS 38. Proponents of a capitalization of R&D outlays argue that this accounting policy provides relevant information to investors. In contrast, those opposing such a capitalization state that the resulting asset is too uncertain. The findings demonstrate that the arguments of both supporters and opponents basically remain valid and are therefore to some extent incompatible. However, given this incompatibility a discussion of the empirical findings in context with the arguments brought forward within the political debate surrounding IAS 38 illustrates that IAS 38 eventually pursues a reasonable approach to balance these conflicting views.

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List of Abbreviations

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AASB ……........ Australian Accounting Standards Board Adj. ………….... adjusted AUS GAAP …... Australian Generally Accepted Accounting Principles BC …………......basis for conclusion BilMoG ………..Bilanzrechtsmodernisierungsgesetz (Accounting Law Moder- nization Act) CAN GAAP …...Canadian Generally Accepted Accounting Principles CAPM …………capital asset pricing model CDax…………... German share index consisting of all firms traded in the Gen- eral or Prime Standard of the Frankfurt Stock Exchange CSR …………... clean surplus relation Dax …………… Deutscher Aktien Index (German share index consisting of the 30 largest firms by trading volume and market capitalization) e.g. ……………. for example ed. …………….. edition Eds. …………… editors EU …………….. European Union FASB …………. Financial Accounting Standards Board ff. ……………... following FR GAAP …….. French Generally Accepted Accounting Principles GER GAAP …... German Generally Accepted Accounting Principles HGB ………….. Handelsgesetzbuch (German Commercial Code) IAS …………… International Accounting Standards IASB ………….. International Accounting Standards Board ICB …………… industry classification benchmark IFRS ………….. International Financial Reporting Standards ITA GAAP ….... Italian Generally Accepted Accounting Principles MDax …………. German share index for major medium-cap firms MU …………… monetary units XVIII Nemax 50 …….. German share index for young technology firms from 1999- 2002 P&L …………... profit and loss statement p. ……………… page para. …………... paragraph pp. …………….. pages R&D ………….. research and development SDax ………….. German share index for major small-cap firms Sec. …………… section SFAS …………. Statement of Financial Accounting Standards SSAP …………. Statement of Standard Accounting Practice std. ……………. Standard TecDax ……….. German share index for major technology firms UK GAAP …..... United Kingdom Generally Accepted Accounting Principles US GAAP……... United States Generally Accepted Accounting Principles

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