R&D expensed or capitalized

[noytmikcap]

I thought US GAAP required R&D to be expensed.
Question 37 morning exam 3 of Schweser Volume 2 exams
adjusts the R&D to be capitalized. When adjusting financial
statements do we capitalize?
thanks, any input would be appreciated

 

[barthezz]

us gaap: expense
for economic value added models. capitalize and amortize.

 

[sebrock]

I believe for true NOPAT calculations (from what I can remember from my MBA) I believe that is one of the adjustments. I will personally just stick with EBIT (1-T) for the purposes of the exam.
For balance sheet adjustments, as it relates to the CFAI material, I dont believe you capitalize R&D. In the real world (software companies aside), depending on the company you are analyzing , you might want to. In terms of acquisitions, it could tell you a lot about Goodwill. This is because a high R&D company will have a low asset base since one of their main assets (innovation and product development) is expensed every year and this might not reflect it’s true value of the company.

 

[Elixerseven]

Thanks Barthezz… I was infuriated for about 10 minutes and threw my paper water cup about 5 times before crushing it.

 

[noytmikcap]

barthezz Wrote:
——————————————————-
> us gaap: expense
>
> for economic value added models. capitalize and
> amortize.
thanks dude or dudette!!