Abstract:
The respective research is conducted, in order to identify the impact or influence of
expensed R & D as well as capitalized R & D on the financial performance of the
firm, in accordance with the International Financial Reporting Standards. Its
necessitate that the R & D expenditures must be accounted in the comprehensive
income statement, and none of the intangible assets are considered from the R & D
research phases must be accounted as an asset in the statement of financial position.
For the data collection, the total samples size contains of 105 firms with 525
observations, from the audited financial statements of the public listed companies at
Colombo Stock Exchange, which are engaged with the R & D activities over the
period of last five financial years between 2010/2011 and 2014/2015. Those samples
are adopted with the random and stratified sampling techniques as well as the
multivariate quantitative technique is selected as the research technique to measure the
financial performance of the firm by using the selected accounting based indicators.
Such as; Interest cover ratio (ICR), Price-earnings ratio (PER), Capital structure
gearing ratio (CSGR), Return on invested capital employed (ROICE), Earnings per
share stock (EPSS), Dividend yield ratio (DYR), Return on assets ratio (ROAR),
Asset turnover ratio (ATR) and Dividend cover ratio (DCR).
The results could be concluded as; the expensed R & D positively associates with
DCR, negatively associates with EPSS, positively associates with CSGR with does
not have any substantial impact and negatively associates with ROAR, ROICE, DYR
and PER. On the other hand the capitalised R & D has substantial negative association
on ROAR, ROICE and EPSS; meanwhile it’s positively associates with CSGR but
does not have any substantial impact and negatively associates with DYR, DCR and
PER.
