Empirical research on the asset quality of development assets in Japanese companies adopting IFRS

Abstract

In this study I examine the asset quality of development expenditure capitalized by IAS 38 of IFRS for Japanese companies adopting IFRS. Specifically, 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. Furthermore, we analyze the value relevance of development assets. I can’t find that the development assets have a positive relationship with the level of future profit margin. However, on the other hand, I find that the development assets do not increase the uncertainty of future profit margin. I also find that the development assets have value relevance. In addition, I investigate the status of development assets. I find that the status of development assets varies by industry and that the status of development assets differs for each company even in the same industry. These are probably because the uncertainty of development differs depending on the characteristic of industry and company.