And the Conflicting Forces that Shape Financial Accounting: An Empirical Analysis
6 Evaluation of the Findings
This section evaluates the findings of sections 4 and 5 in context with the re- search question of the thesis if the regulatory efforts of IAS 38 provide measures of R&D capital which (1) constitute relevant information for equity markets, however, at the same time, (2) involve only an acceptable degree of uncertainty. It further provides a discussion about the extent to which the empirical evidence presented addresses arguments that have been discussed within the political de- bate on IAS 38. Finally, the section concludes with a limitation of the thesis which originates from the relatively strong emphasis on the information role of financial accounting in sections 4 and 5. This focus neglects the role of financial accounting information in contracting settings. 6.1 A Synthesis of the Findings on the Trade-off Between Relevance and the Uncertainty of Future Benefits As illustrated in section 3.1.3, the approach pursued by IAS 38 can be inter- preted as trying to strike a balance between full capitalization and full expensing rules of R&D. Consistent with the argument that investors associate future bene- fits with capitalized R&D outlays brought forward by advocates of a capitaliza- tion of R&D outlays, IAS 38 requires a capitalization of development costs un- der certain circumstances. In contrast, consistent with the argument brought forward by those supporting an immediate expensing of R&D outlays, IAS 38 requires all research and the remaining development costs to be expensed as in- curred since future benefits from these investments...
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