Erasmus University Rotterdam Erasmus School of Economics Master Accounting, Auditing and Control Master's Thesis Accounting, Auditing & Control Successful-Efforts

5.2.2 Sample selection

In this research not all these firms will be used in the sample for statistical testing. The test period is from 2000 to 2007. The regression models that test the successful-efforts method are companies that apply IFRS. The research period for these companies is from 2005 to 2007. To keep the research attainable the population needs to be reduced because, this research investigated two methods for recognizing R&D expenditures. The following criteria will reduce the population to a workable sample:

1. 
   the firm’s annual report is based on IFRS, US GAAP or Japanese GAAP in the reference year 2007;
   
2. 
   the firm’s annual reports for the research period are available; and
   
3. 
   a firm in the sample must report on R&D expenditures.
   

The first criterion is that the firm in the reference year, which is 2007, that either use IFRS, US GAAP or Japanese GAAP as their reporting standard. 2007 is used as the reference year, because it is the most recent year in our research period. There are two reasons to choose for IFRS, US GAAP and Japanese GAAP for the reporting standard criterion. First, these are the three leading accounting standards in the automotives industry. Most of the firms that met the population criterion used either IFRS or US GAAP or Japanese GAAP as a reporting standard for their annual report. Second, this research tries to find the difference in value relevance between the cash-expense method and the successful-efforts method for recognizing R&D expenditures. By using these standards it is possible to capture both capitalizing and expensing companies. As discussed in section 3.3 ‘R&D accounting standards’, under US GAAP, firms are mandated to expense all R&D expenditures. Under IFRS, companies are obliged to capitalize R&D expenditures when specific criteria are met. According to the audited annual report 2007 (p. 102) from Yamaha Motor Company and the annual report of 2007 (p. 55) from Nissan Motor Company, which are based on Japanese GAAP, can be concluded that all R&D expenditures are expensed. The ASBJ provides standards with respect to R&D expenditures in Statement No. 23. As discussed in section 3.3, these standards are only available in the Japanese language. Van Mourik (2007, 142) states that the ASBJ prescribes the same standard as the FASB. This concludes that the ASBJ prescribed the cash-expense method. After the first criteria there are 65 firms excluded from the list that were not using these three main standards. The non-final sample after criterion one is 43 firms.