R & D expenses capitalization adjusted profits

　Capitalization of R & D costs: YesThe research and development costs are included in the development expenditures on the balance sheet. The capitalization of development expenditures can reduce the costs of enterprises and report more net profits, but the cost is to reduce the enterprise's cash. R & D costsWhen capitalization is made, the corresponding cash flow is included in the cash flow statement for the "construction of fixed assets, intangible assets and other long-term assets paid in cash", which is the cash flow of investment activities.

R & D expenditures: The R & D fee is included in the income statement, which increases the current fee and reduces the current profit. When the development expenditure is fully charged, the corresponding cash flow is confirmed in the operating cash flow. Therefore,Development expenditure capitalization can exaggerate the operating cash flow.

"The essential difference between R & D fees and capitalization is that R & D fees are calculated into the balance sheet and are gradually amortized. The latter is calculated into the income statement and directly reflected in the quarterly profit.. Therefore, the capitalization method can indeed increase the net profit level for the quarter.

　　Generally, enterprises will choose to deal with high-profile industries with charges, and use capitalization to deal with low-profile industries..

Case -- Yi hualu

Financial reports show that in the first three quarters of 2012, the company's main business revenue was 0.305 billion yuan, a year-on-year increase of 50%; net profit was 26 million yuan, a year-on-year increase of 35%.

It is worth noting that the company's net profit in the third quarter fell by 3.07% year on year, showing signs of slowdown. In addition, the company's development expenditure in the third quarter increased by four times year-on-year, and there are obvious signs of profit adjustment through the capitalization of R & D costs.

"Whether it is capitalization or cost-based processing of R & D costs, as long as they comply with accounting standards, it is acceptable, of course, generally, software enterprises will choose to use the cost when the industry has a high degree of prosperity, and use the capitalization to deal with the low degree of prosperity." Ma jinghao, a finance and tax expert, said in an interview with the financial business reporter of the first financial daily.

Development expenditures increased by four times year on year

According to reports, due to factors such as the macroeconomic decline, the performance of listed companies in the software industry is generally poor in the near future.

"Since the beginning of 2011, the overall situation of China's economy has shown a downward trend. In this case, enterprises will reduce their budgets and the investment in software costs will often become a priority for budget reduction, this is the main cause of poor performance in the software industry." Said Qiao shengpu, managing consulting partner of the minor strategy.

In this context, many software companies choose to use the method of capitalization of R & D costs to handle the three quarterly reports, and yihualu is one of them.

Data shows that in the first three quarters of this year, the development expenditure of yihualu is 0.062 billion yuan, while the management cost, including R & D expenses, is only 0.024 billion yuan. It can be seen that through the capitalization of R & D expenditures, this reduces the cost in the income statement and improves performance. If all R & D fees are charged, the company's net profit for the first three quarters will be lost.

In fact, the company's development expenditures for the first three quarters of this year increased by 0.05 billion compared with the 23.06% yuan reported this year, compared with 0.023 billion yuan at the end of last year. Compared with 0.012 billion yuan in the first three quarters of last year, it rose by 418.28%.

According to the company, development expenditures increased by September 2012 from the end of 2011 to the end of 164.72%, mainly because funds were raised to invest in Intelligent Traffic Management Operating System R & D.

"Whether R & D fees are capital or cost-based, the essential difference is that the former is included in the balance sheet and gradually amortized, while the latter is included in the income statement, it is directly reflected in the profit of the current quarter. Therefore, the capitalization method can indeed increase the net profit level for the quarter ." Ma jinghao said.

Shen yinwanguo analyst Min Hao said in the release of the research report that the capitalization or charges of development expenditures affect the net profit, cash flow and valuation of listed companies, sometimes a great impact. Different accounting principles are adopted for direct comparison, which leads to distorted conclusions on the company's net profit, growth, or valuation.

Is development expenditure capitalization or cost-based a company's quality signal?

Although the latest accounting standards after 2007 define the capitalization conditions for R & D expenses, it is difficult to strictly distinguish between the research and development stages, and the judgment of the five capitalization conditions in the development stage is also subjective, the capitalization of development expenditures depends on the subjective choice of business operators.

Yan Hao believes that the capitalization of development expenditures is not only the company's independent choice, but also a kind of choice. It is a signal of the company's quality. It is suggested that investors pay attention to conservative accounting companies.

Data shows that yihualu was listed on the market in 5.0768 million. From to, its development expenditure was 0 until the first half. Subsequently, the company maintained the "tradition" of capitalization of R & D costs, and gradually increased.

The company said: "The Capital R & D expenditure accounting mainly involves two fund raising and investment projects-the smart traffic management operating system and the software development expenditure related to the new generation of Intelligent Transportation System Development and Construction Demonstration projects, A small amount of expenditure is the R & D expenditure of Dalian smart bus management platform software. Because the accounting of the two fundraising projects started only after the company was listed, there was a situation where the company's capital R & D expenditure was zero before the listing, and there was only capitalization R & D expenditure after the listing."

According to wind statistics, 30 out of 49 shenwan software companies processed R & D expenses capitalization, while 19 other companies chose a cost-based solution. In addition to yihualu, companies such as brilliant technology (002296) (002296.sz) and great intelligence (601519) (601519.sh) all cost the development expenditure before 2011, the development expenditure capitalization method was adopted after 2011.

Data shows that the net profit growth rate of yihualu in the first three quarters was 35.38%, ranking 8th among 49 shenwan2 companies. In the same period, the net profit growth rate of Yinjiang (300020) (38.27% yuan sz) was, similar to the net profit growth rate of yihualu, during the same period, the development expenditure of yihualu was 61.9641 million yuan, while that of Yinjiang was only 0.2022 million yuan. In addition, CEN (002410) (002410.sz), hand information (300170) (300170.sz) and other companies are relatively conservative in accounting processing.

R & D expenses capitalization adjusted profits