Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Value relevance of R&D reporting in India: significance of intangible intensity

Value relevance of R&D reporting in India: significance of intangible intensity PurposeFundamental shifting of the world toward intangible intensive economy raised an apprehension regarding value relevance of internally generated intangible assets. In the previous studies, research and development (R&D) expenditure is recognized as a significant accounting item, which can indicate potential internally generated intangible assets. This study aims to examine whether investors consider nature of intangible intensity of a firm for the evaluation of R&D expenditure to determine equity values in India.Design/methodology/approachThe authors compared value relevance of capitalized and the expensed portion of R&D expenditure between intangible- and non-intangible-intensive firms. They adopted empirical model grounded on the generalized version of Ohlson’s (1995) model.FindingsThe findings of the study indicate that, in intangible-intensive (non-intangible) firms, the capitalized portion of expenditure is positively (negatively) significant and the expensed portion of R&D expenditure is negatively (positively) significant to explain equity values.Practical implicationsThe findings of this study may have potential implication for the discussion on the accounting treatment of internally generated intangible assets based on the nature of intangible intensity of the firm. The study also suggests that while setting standards, standard-setters should consider nature of intangible intensity of the firm, which could disseminate the discrepancy between the market and book value of the equity.Originality/valueThe study provides evidence, how value relevance of R&D reporting is affected by the nature of intangible intensity of a firm. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Reporting and Accounting Emerald Publishing

Value relevance of R&D reporting in India: significance of intangible intensity

Loading next page...
 
/lp/emerald-publishing/value-relevance-of-r-d-reporting-in-india-significance-of-intangible-2ROREMgoBQ
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1985-2517
DOI
10.1108/JFRA-08-2017-0073
Publisher site
See Article on Publisher Site

Abstract

PurposeFundamental shifting of the world toward intangible intensive economy raised an apprehension regarding value relevance of internally generated intangible assets. In the previous studies, research and development (R&D) expenditure is recognized as a significant accounting item, which can indicate potential internally generated intangible assets. This study aims to examine whether investors consider nature of intangible intensity of a firm for the evaluation of R&D expenditure to determine equity values in India.Design/methodology/approachThe authors compared value relevance of capitalized and the expensed portion of R&D expenditure between intangible- and non-intangible-intensive firms. They adopted empirical model grounded on the generalized version of Ohlson’s (1995) model.FindingsThe findings of the study indicate that, in intangible-intensive (non-intangible) firms, the capitalized portion of expenditure is positively (negatively) significant and the expensed portion of R&D expenditure is negatively (positively) significant to explain equity values.Practical implicationsThe findings of this study may have potential implication for the discussion on the accounting treatment of internally generated intangible assets based on the nature of intangible intensity of the firm. The study also suggests that while setting standards, standard-setters should consider nature of intangible intensity of the firm, which could disseminate the discrepancy between the market and book value of the equity.Originality/valueThe study provides evidence, how value relevance of R&D reporting is affected by the nature of intangible intensity of a firm.

Journal

Journal of Financial Reporting and AccountingEmerald Publishing

Published: Sep 2, 2019

References