Exploring investor viewson accounting for R&D costs under IAS 38

Francesco Mazzi, Richard Slack, Ioannis Tsalavoutas, Fanis Tsoligkas

Research output: Contribution to journalArticlepeer-review


Research and development (R&D) is increasingly significant in the global economy and its accounting treatment has always been, and remains, a contentious area. The standard governing its accounting treatment under International Financial Reporting Standards is IAS 38 Intangible Assets. This was issued in 1998 and remains in force today. This study contrasts the thinking of the standard setters in the historical development of the standard with evidence through interviews with contemporary buy-side and sell-side equity investors. Specifically, we examine the decision-usefulness of R&D accounting information to them, and especially that of the capitalisation of development costs. This unique insight reveals that investors find R&D accounting information useful for decision making, are supportive of the principle of the mandatory capitalisation of development costs, subject to meeting specified conditions, and are very much opposed to a US expense all treatment. However, they do not regard such assets as providing an adequate signal of future value creation to them, which was the expectation of the standard setters. This is attributed to the perceived vagueness and subjectivity of the conditions currently in the standard. The theoretical framing of dissonant translation is employed to unpick these tensions. The study makes significant contributions to the standard setting and R&D strands of the financial accounting literature and the findings raise important policy implications.

Original languageEnglish
Article number106944
JournalJournal of Accounting and Public Policy
Issue number2
Early online date10 Feb 2022
Publication statusPublished - 1 Mar 2022


  • Capitalisation
  • Dissonance
  • Investors
  • R&D
  • Research and development

ASJC Scopus subject areas

  • Accounting
  • Sociology and Political Science


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