Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/294902 
Year of Publication: 
2019
Citation: 
[Journal:] Junior Management Science (JUMS) [ISSN:] 2942-1861 [Volume:] 4 [Issue:] 2 [Year:] 2019 [Pages:] 151-172
Publisher: 
Junior Management Science e. V., Planegg
Abstract: 
Capitalization of development costs is compulsory according to IFRS if a set of criteria is fulfilled. However, this obligation is considered as a de facto right for capitalization since the criteria are quite subjective, allowing for a certain degree of flexibility. Hence, the question arises whether managers use research and development (R&D) accounting to conduct earnings management in terms of income smoothing. Using a sample of German listed companies, the study conducts several regression analyses to test whether there is a negative relationship between R&D capitalization and different income smoothing proxies. Results show that the hypothesis is supported independent of the income smoothing proxy used. The study proofs that managers indeed use R&D capitalization judgments to conduct income smoothing.
Subjects: 
R&D capitalization
income smoothing
earnings management
R&D accounting
development costs
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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