Theory And Practice Of The Accounting Treatment Of Research And Development Costs

In the era of knowledge economy, the percentage of R&D expenditure has been increasingly growing in the overall budget of an enterprise, emerging as a regular and stable expenditure and composing a sustaining force for the development of the enterprise and the formation of its core competency. The Accounting Standards for Business Enterprises issued in 2001 requires the treatment of the expenditure of R&D as instantaneous expense. This established method of treatment has revealed its limitations. Drawing on the practice of the international accounting standard, the new accounting standards issued in 2006 demands the R&D expenditure be expensed and capitalized respectively in their accounting treatment in accordance with the different stages of research and development.As an important management and administration strategic decision, R&D expenditure is vital to the long-term and sustaining profit capability and competency of an enterprise. With the issue of the new accounting standard and the enforcement of the new Enterprise Income Tax Law, the exploration into the accounting treatment of R&D expenditure in the enterprise is of great importance to the improvement of the quality of financial report, the effective protection of the interest of information users especially that of the investors, the optimal use of enterprise resource and the sharpening of the competitive edge of the enterprise. Under the guidance of the Scientific Development Concept, technology and innovation are playing increasing important roles. As the R&D expenditure increases, the accounting treatment of this essential expenditure becomes the focus of discussion. This thesis analyses the theory and practice of the accounting treatment of R&D expenditure.