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| Author: | Anagnostopoulou, S.C. |
| Title: | Does the capitalization of development costs improve analyst forecast accuracy? Evidence from the UK |
| Journal: | Journal of international financial management & accounting
2010 : SPRING, VOL. 21:1, p. 62-83 |
| Index terms: | accounting financial analysis financial statements earnings forecasting R&D investments United Kingdom |
| Language: | eng |
| Abstract: | Investments in Research and Development (R&D) have been documented to be associated with increased errors and inaccuracy in earnings forecasts made by financial analysts. This paper explores whether the capitalization of development costs can reduce analyst uncertainty about the future economic outcome of R&D investments etc. Based on U.K. data, the choice to expense (henceforth as: c-to-e.) R&D rather than conditionally capitalize development costs is found to relate positively to signed analyst forecast errors. The decision to capitalize (here as: c-to-c.) vs. expense is not found to have a significant influence on analyst forecast revisions. The findings are interpreted as evidence that the c-to-c. as opposed to c-to-e. may help to reduce deficiencies in analyst forecasts. |
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