TY - JOUR
T1 - The value relevance of R & D reporting in the UK after IFRS mandatory implementation
AU - Tsoligkas, F.
AU - Tsalavoutas, I.
PY - 2011
Y1 - 2011
N2 - Following IFRS mandatory adoption in 2005, the criteria determining the accounting treatment of R&D expenditure have changed for UK listed companies that publish consolidated financial statements. Therefore, recent literature raises concerns about the value relevance of R&D assets and expenses in the UK, after 2005. Using very recent data, we respond to these calls for research. Adding to the absence of prior evidence regarding the pre-IFRS period, we find that the capitalised portion of R&D is significantly positively related to market values, suggesting that the market perceives these items as successful projects with future economic benefits. R&D expenses are significantly negatively related to market values under IFRS, supporting the proposition that they reflect no future economic benefits and thus they should be expensed. Also in contrast with evidence regarding the pre-IFRS period, R&D expenses are negatively value relevant only for large companies. Accordingly, we argue that transition to IFRS does have implications on the valuation of R&D expenditure in the UK
AB - Following IFRS mandatory adoption in 2005, the criteria determining the accounting treatment of R&D expenditure have changed for UK listed companies that publish consolidated financial statements. Therefore, recent literature raises concerns about the value relevance of R&D assets and expenses in the UK, after 2005. Using very recent data, we respond to these calls for research. Adding to the absence of prior evidence regarding the pre-IFRS period, we find that the capitalised portion of R&D is significantly positively related to market values, suggesting that the market perceives these items as successful projects with future economic benefits. R&D expenses are significantly negatively related to market values under IFRS, supporting the proposition that they reflect no future economic benefits and thus they should be expensed. Also in contrast with evidence regarding the pre-IFRS period, R&D expenses are negatively value relevant only for large companies. Accordingly, we argue that transition to IFRS does have implications on the valuation of R&D expenditure in the UK
UR - http://www.scopus.com/inward/record.url?scp=79960170704&partnerID=8YFLogxK
UR - http://dx.doi.org/10.1080/09603107.2011.556588
U2 - 10.1080/09603107.2011.556588
DO - 10.1080/09603107.2011.556588
M3 - Article
SN - 0960-3107
VL - 21
SP - 957
EP - 967
JO - Applied Financial Economics
JF - Applied Financial Economics
IS - 13
ER -