R & D expense adjustment profit

The essential difference between R & D fees and fees is that the former (capitalization) is calculated into the balance sheet and the R & D fees are gradually amortized.

The latter (cost-based) is included in the income statement (management cost), which is directly reflected in the profit of the current quarter. Therefore, the capitalization method can indeed increase the net profit level for the quarter.

 

 

 

Capitalization of R & D costs

 

That is, the cost of research and development is included in the balance sheet.Development expenditureMedium, capitalization of development expenditure can reduce the cost of the enterprise, so as to report more net profits,But the cost is to reduce the company's cash.. When development expenditures are capitalized, the corresponding cash flows are included in the cash flow statement for "constructing cash payments for fixed assets, intangible assets and other long-term assets,Cash outflow for investment activities.When the development expenditure is fully charged, the corresponding cash flow is confirmed in the operating cash flow.Therefore, the capitalization of development expenditures can exaggerate the operating cash flow.