Development expenditures capitalized by IAS 38 and future performance

Empirical research for EU major companies

Abstract

In this study I examine the relationship between development expenditures capitalized by IAS 38 of International Accounting Standards and future performance. Specifically, I focus on EU major companies, about 30 industries. 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. I can’t find that development assets have a positive relationship with the level of future profit margin. However, on the other hand, I find that development assets do not increase the uncertainty of future profit margin. I also investigate the status of capitalized development assets, find that more companies in the manufacturing industry have development assets than in other industries. And I find that the status of capitalized development assets varies by industry.