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Second, based on the theory of moral disengagement, OESIC rationalizes employees’ behaviours after committing unethical behaviour, which can alleviate their guilt for engaging in misconduct (Umphress and Bingham, 2011; Lian et al., 2020). Our findings validate previous research accounting for r&d on OEC and unethical behaviour and extend it to the field of accounting. Unethical behaviour is a common organizational phenomenon that has many detrimental consequences for the long-term development of organizations (Aguilera and Vadera, 2008; El-Helaly et al. 2020).
- In addition, this paper studies the moderating effect of Confucian ShiZhong Thinking (CSZ Thinking), a typical characteristic of the Chinese people.
- This Directive is intended to provide an efficient methodology for determining qualified research expenses (QREs) for LB&I taxpayers that meet the requirements of this Directive and to more efficiently manage LB&I’s audit resources.
- Many businesses in the commercial world spend vast amounts of money, on an annual basis, on the research and development of products and services.
- The findings of this study provide a new perspective for management to effectively restrain UAB by reducing accountants’ perception of OESIC and fostering their CSZ Thinking.
- Although the payment is non-refundable, Company A will receive a future benefit (the rights to the research) as the CRO performs the research services over the two-year period.
- Duplicate questionnaires were identified by the duplicate case detection function of the software.
If the benefit will be for more than one accounting period, it is usually classified as an asset. If the outlay provides economic benefit for less than a year it is generally classified as an expense. Treat the development costs as incurred expenses or intangible assets, provided the software is only used in the R&D project. The benefit of the IFRS approach is that at least some research and development costs can be capitalized (i.e., turned into an asset on the company’s balance sheet) instead of being incurred as an expense on the statement of Profit and Loss (P&L). The thoughts and behaviours of Chinese people are deeply influenced by Confucian culture.
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Existing research shows that Chinese Confucianism, as an essential part of traditional Chinese culture, plays a positive role in organizational management and business ethics (Liu and Stening, 2016; Yuan et al. 2022). Confucius, the founder of Confucianism, said the Confucian gentleman conforms to Zhongyong (the golden mean) and abides by ShiZhong and moderation. With the guidance of CSZ Thinking, people can take the initiative to digest different ethical standards and oppose the rigid understanding of ethical standards divorced from specific situations. CSZ Thinking emphasizes that Confucian gentlemen should act at the right time and constantly understand the changing ethical situation through their cultivation and efforts.
If Company A exercised the buy-back option, it would reacquire the rights to commercialize the intangible asset. Since exercisability of the buy-back option is only triggered upon regulatory approval, the payment made by Company A to reacquire the rights would be capitalized when the option is exercised and then amortized over the useful life https://www.bookstime.com/articles/what-is-opportunity-cost of the right. Company A should record clinical trial expense for work performed by CROs in the period when services are performed, not necessarily when payments are made. An accrual should be recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs and other outside service providers.
A Guide To Research and Development Accounting
Individuals with different cultural backgrounds may have different perceptions of OEC that further affect their moral judgement and (un)ethical behaviour. Since our main focus is UAB in China, the particular cultural context of China needs to be considered. Confucian culture has profoundly influenced Chinese people for thousands of years (Xiong and Wei, 2020; Chen et al. 2021). Korea, Japan and some Southeast Asian countries have also been influenced by Confucian culture to some extent (Dollinger, 1988; McDonald, 2012; Kim and Hamilton-Hart, 2022). Confucianism emphasizes ethics and morality for human edification (Zhu, 2015) and can influence people’s perception of the ethical climate.
Confucianism has been passed down and developed over thousands of years and has a very rich connotation, so different aspects of Confucian culture may also have different impacts on organizations (Chen and Chung, 1994). Zhongyong (the golden mean) is considered to be the core of Confucianism and has been studied widely and deeply as the way for Chinese people to conduct their daily lives. The core of Zhongyong is ShiZhong Thinking, which means timely correction and the golden mean. Synthesizing the concepts of “Shi (timely)” and “Zhong (the middle)” is a typical characteristic of Chinese philosophy, which emphasizes the flexible and appropriate handling of problems according to the situation. Therefore, Confucian ShiZhong Thinking is a fundamental way of thinking that profoundly impacts Chinese ethical behaviours. Reporting research and development costs poses incredibly difficult challenges for accountants.
7 External development of intellectual property with buy-back options
This may further affect employees’ psychological experience and exacerbate the creation of more adverse behaviours (Yang et al. 2021). Whether the starting point is good or bad, management should resolutely curb or punish this UAB. Second, this study indicates that OESIC and CSZ Thinking have a substitutive relationship. The conclusion of this paper is consistent with previous research that employees’ personality plays an important role in the relationship between organizational climate and employees’ behaviour (Ahmad et al. 2018).
Any items that have alternative future use are treated as capital expenditure and their costs can be depreciated over time. Like any other project, research and development (R&D) incurs expenditure that should be included in your business accounts. However, the treatment of the expenditure varies if the items have an alternative future use. If any of the recognition criteria are not met then the expenditure must be charged to the income statement as incurred. Note that if the recognition criteria have been met, capitalisation must take place.