Capitalization of In-Process Research and Development under SFAS 141R and Information Asymmetry

Hyeesoo (Sally) H. Chung, Stephen A. Hillegeist, You Il Park, Jinyoung P. Wynn

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


This study examines the effect of capitalizing acquired in-process research and development (IPR&D) on information asymmetry under Statement of Financial Accounting Standards No. 141 (R) (SFAS 141R). SFAS 141R requires acquirers to fully recognize IPR&D at fair value as an indefinite-lived intangible asset until completion or discontinuation of the project. Prior research suggests IPR&D capitalization will result in an improvement in the information environment. In contrast, we find no evidence that capitalizing IPR&D improved the information environment for IPR&D acquirers. Instead, most of our results suggest no significant change in information asymmetry for IPR&D acquirers during the post-SFAS 141R period, relative to the concurrent changes for non-IPR&D acquirers. In cases in which the results suggest a statistically significant increase, the economic magnitudes are relatively small. In addition, we find no evidence that IPR&D acquirers engaged in increased classification shifting between IPR&D and goodwill during the post-SFAS 141R period, as critics of capitalization had feared.

Original languageEnglish (US)
Pages (from-to)2379-2407
Number of pages29
JournalContemporary Accounting Research
Issue number4
StatePublished - Dec 1 2019

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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