| Nowadays economic environment is changing complicatedly; economy andtechnology are developing rapidly. In order to gain a strategic competitive advantageand sustainable development in the market, enterprise need to enhance scientific andtechnological innovation, strengthen the R&D investment. More and more enterprisesare aware of the crucial role of R&D investment in the development andcompetitiveness of enterprises, then the enterprises put more and more investment inR&D projects. In this circumstance, the recognition, measurement and disclosure of theaccounting treatment of R&D investment has an important impact on their financialreporting. The different accounting treatment of R&D expenses, not only affects theauthenticity and comparability of financial information, but also affects the scientificand technological progress and development of enterprises and the whole country. Forthe economic develops healthily, formulating some correct and reasonable accountingpolicies in R&D investment is particularly important.The current accounting standards in R&D expenditures capitalized in accountingpolicy changed the original total cost of R&D expensed practices; allow some R&Dexpenses capitalized as an asset. Many scholars believe that R&D expenditurescapitalization can effectively reduce the number of earnings management behaviorcaused by R&D expensed in accounting policies. This policy will greatly improve thefinancial condition and results of those high-tech companies, venture capital firms andenterprises with high R&D investment level, creating a good environment for theirdevelopment. However, capitalization of R&D expense by the specific conditions of theaccounting policies can be found a lot of subjective judgment. The R&D activities ontheir own activities outside cause the asymmetry of information, which makes itdifficult to have a clear understanding in R&D activities. It is likely to become a goodway to earnings management for enterprises. This paper analyzes the current accountingstandards in R&D expenditures capitalized with earnings management theory, andconcludes that enterprises are likely to take advantage of R&D expenditurecapitalization to manage earnings in a variety of ways.This paper uses two methods of empirical research methods and experimentalmethods, to study the capitalization of R&D expenditures and earnings managementissues. First, this paper uses from2007to2012in Shanghai and Shenzhen A-share companies as the research samples, subdivides the earnings management behavior intoaccruals earnings management, real earnings management in CFO manipulation, realearnings management in product cost, real earnings management in discrete cost andintegrated real earnings management. Then by the extending Jones model andRoychowdhury’s real earnings management model of the sample companies, this paperworks out respectively the accrued earnings management, real earnings management inCFO manipulation, real earnings management in product cost, real earningsmanagement in discrete cost and integrated real earnings management, and analyzes thecapitalization of R&D expenditures and five kinds of earnings management withregression model. Besides, this paper uses experimental methods to examine whetherthe capitalization of R&D expenditures causes the real earnings management ofover-investment.Finally, the results of this paper suggest that the capitalization of R&Dexpenditures can reduce the real earnings management in discrete cost, and thecapitalization of R&D expenditures may cause accruals earnings management, realearnings management in CFO manipulation and integrated real earnings management,but there isn’t any significant correlation between the capitalization of R&Dexpenditures and the real earnings management in product cost. And it also concludesthat the capitalization of R&D expenditures may lead to the reputation-driven andmoney-driven real earnings management of over-investment. |
