ACCOUNTING MATTERS! International insight
Research and development costs are an example of different international accounting standards. Compare how four countries account for research and development (R&D):
|
Country |
Accounting Treatment |
|
United States |
Expenditures are expensed. |
|
United Kingdom |
Certain expenditures may be capitalized. |
|
Germany |
Expenditures are expensed. |
|
Japan |
Expenditures may be capitalized and written off over 5 years. |
Thus, an R&D expenditure of $100 million is charged totally to expense in the current period in the United States and Germany. This same expense could range from zero to $100 million in the United Kingdom and from $20 million to $100 million in Japan!
What would be the advantage of similar accounting standards for all countries? How can the financial and operating performance of international companies be compared?