Identifying Corporate Expenditures on Intangibles Using GAAP

L. C. Hunter, Elizabeth Webster () and Anne Wyatt
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L. C. Hunter: Intellectual Property Research Institute of Australia, The University of Melbourne and School of Business and Management, University of Glasgow
Anne Wyatt: UQ Business School, University of Queensland

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper aims to show how firms account for expenditure on their intangible investments and how this influences their decision making processes. Evidence from our survey of 614 large Australian companies show that (1) firms do not systematically identify and separate expenditures on intangible investment from expenditures on tangible investment and operating expenditures; and (2) this leads to an information gap that adversely affects the firm's internal processes for evaluating the decision to invest in intangibles. The paper builds a deductive argument for the use of the general purpose financial reporting system (GAAP) to separate and report the expenditures on intangibles by corporations in a way that is consistent and comparable across firms and over time. Our evidence suggests that investment decisions by management and investors, where intangibles are involved, are likely to be based more on rules-of-thumb than objective evidence.

Keywords: managerial accounting system; GAAP accounting system; expenditures on intangible investment, rate of return (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-05
New Economics Papers: this item is included in nep-acc and nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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