Open AccessThe efficiency of accounting normalization in the matter Of intangibles: Asset versus Expense
Author(s) -
Ben Brahim Houneida,
Mounira Ben Arab
Publication year - 2011
Publication title -
international journal of accounting and financial reporting
Language(s) - English
Resource type - Journals
ISSN - 2162-3082
DOI - 10.5296/ijafr.v1i1.762
Subject(s) - intangible asset , balance sheet , business , shareholder , volatility (finance) , off balance sheet , earnings , asset (computer security) , normalization (sociology) , accounting , finance , corporate governance , computer security , sociology , computer science , anthropology
In this paper, we seek to show if the intangible investments may accomplish the recognition’s criteria of an intangible asset and we show, thus, if these criteria are capable to preserve the quality of accounting information. We find that the capability of the intangible investments (R&D), immediately expensed, in the generation of future benefits is more important than the other investments (tangibles and intangibles investments recognized in the balance sheet). This capability is largely influenced by the engagement’s degree of the managers. Further, these investments are susceptible to diminish the future earnings volatility and, consequently, their future profits may be measured with reliability and capitalized in the balance sheet as an asset essentially for the firms that have a strong alignment between the manager’s and shareholder’s interest.