Capitalising or expensing research and development expenditures: a tax perspective explanation

Liangliang Wang

China Journal of Accounting Studies, 2016, vol. 4, issue 1, 79-103

Abstract: Tax is frequently an important determinant of accounting choices. This study investigates the impact of tax incentives on certain accounting choices associated with research and development (R&D) expenditures. The empirical evidence suggests that firms facing a higher tax rate exhibit a significantly lower capitalisation ratio of R&D expenditures than firms facing a lower tax rate because of the higher tax benefits associated with expensing R&D expenditures. Further, the negative relation between tax rate and the capitalisation ratio of R&D expenditures is more pronounced for firms with lower financial reporting costs, for non-state-owned enterprises, and for firms in districts with weak tax enforcement. These findings contribute to the literature on accounting choices motivated by tax considerations and provide new explanation for the accounting choices associated with R&D expenditures.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/21697213.2016.1176416 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rcjaxx:v:4:y:2016:i:1:p:79-103

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rcja20

DOI: 10.1080/21697213.2016.1176416

Access Statistics for this article

China Journal of Accounting Studies is currently edited by Xiaochen Dou

More articles in China Journal of Accounting Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().