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Voluntary disclosure on project intangibles from R&D in business reporting: A principles-based approach for R&D intensive companies

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Purpose ‐ Specific asset recognition rules often bar expenses for research and development (R&D) from recognition on corporate balance sheets. This tangible-intangible accounting asymmetry has led to the development of intellectual capital reports (ICRs) for intangibles in general and for R&D in particular. Thus, two dichotomous reporting formats coexist in corporate disclosure. The purpose of this article is to bring together more closely the information on project intangibles from R&D provided by voluntary and mandatory reporting systems. Design/methodology/approach ‐ The authors used an experimental case study approach in a joint research project with a non-university research and technology organisation (RTO). The methods deployed in the project included semi-structured interviews, Delphi techniques and normative reasoning. Findings ‐ The results show that it is possible to use financial reporting's systematic approach and typical layout to ally the presumed strengths of financial reporting (i.e. the existence of standardised ways of interpretation and an educated readership) and indicator-based ICRs (i.e. the capability of capturing the generic features of innovation activity). Practical implications ‐ Given the predominance of financial reporting's educated readership, it is useful to produce voluntary disclosures in such a form that the information can easily be embedded in the overall picture painted by financial numbers. Originality/value ‐ Inductive-analytical ICRs are typically not intertwined with financial accounting. The article elaborates on linkages between financial accounting and inductive-analytical reporting models and proposes a classification scheme for project intangibles from R&D based on information reliability.

Keywords: Accounting standards; Austria; Disclosure; Germany; Intangible assets; Research and development

Document Type: Research Article


Publication date: 2006-10-01

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