The asset quality of development expenditure capitalized by IAS 38

Empirical research for EU major automobile companies

Abstract

In this study I examine the asset quality of development expenditure capitalized by IAS 38 of International Accounting Standards. Specifically, I focus on EU major automobile companies. And, I analyze the relationship between the development assets capitalized as part of intangible assets on the consolidated balance sheet and the level of future profit margin / the uncertainty of future profit margin. In addition, I also examine the relationship between the R & D expenses charged to the consolidated income statement and the level of future profit margin / the uncertainty of future profit margin. I find that development assets have a positive relationship with the level of profit margin in the future and do not increase the uncertainty of future profit margin. On the other hand, I also find that R & D expenses have the effect of increasing the level of future profit margins, but have the effect of increasing the uncertainty of future profit margins.