International Financial Reporting Standards and the value relevance of R&D expenditures: Pre and post IFRS analysis

Syed Zulfiqar Ali Shah, Shuang Liang, Saeed Akbar

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)

Abstract

This study examines the value relevance of research and development (R&D) expenditures in the pre and post International Financial Reporting Standards (IFRS) periods in the UK. It also examines firm size and sector-based differences in the value relevance of R&D during the sample period between 2001 and 2011. The results indicate that capitalized R&D has value relevance during the 11. years sample period. However, the value relevance of capitalized R&D does not appear to have improved in the post-IFRS period. Large firms present higher value relevance of capitalized R&D than small firms which that firm size has significantly different valuation effects on the value relevance of R&D expenditures. Sectors, however, do not appear to present valuation differences across manufacturing and nonmanufacturing firms. The overall findings of this study report no difference in the value relevance of expensed R&D in the pre and post-IFRS periods; however, the value relevance of capitalized R&D appears to decrease from pre to post-IFRS period. We thus argue that these findings have implications for the regulators and accounting professionals.

Original languageEnglish
Pages (from-to)158-169
Number of pages12
JournalInternational Review of Financial Analysis
Volume30
Early online date15 Aug 2013
DOIs
Publication statusPublished - 1 Dec 2013
Externally publishedYes

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