Management's Accounting Choices Impact Firm's Economic Health and Investor Information
The article explores how companies decide to record intangible assets in their financial statements based on economic factors. The study shows that management's choices are influenced by technology strength, cycle time, and property rights, rather than just financial reasons. Intangible assets like identifiable ones are more closely linked to economic factors than regulated assets like purchased goodwill and R&D. Limiting management's choices may actually decrease the quality of financial information for investors.