Hi working in the R&D of an high tech company , I lately was thinking about our product UI (User Interface) - they don't last long, the technology is constantly shifting and you can't find developers that can code your old UI system, after several years you have to re-write your UI. So if we invested 1000 hours into our latest UI, and we know it won't last 15 years, it seems so reasonable to deprecate it just like a do you with a piece of hardware that you buy.
Very good explanation. I just want to make sure that when we capitalize leases, both the depreciation of the lease and interest expense will affect the Income Statement. Operating expense will be affected only by the depreciation, but after EBIT, should we deduct interest expense? So then, we involve the same number twice in the income statement? The same is valid with cash flow, as D&A affects operating cash flow, and interest expense affects financing cash flow?
Thank you for a great series. May I ask why you suggest R&D expenses should only be capitalised over the time it takes to bring the "product" to commercial success? Surely at that point there ought to be the recognition of an intangible asset (the rights to market the new drug or the oil or the content, for example), which should be the PV of estimated future cash flows from these. If the drug proves a failure the asset should be impaired or completely written off; and the PV of oil reserves will presumably always be a function of projected future oil prices, etc.? If so, then isn't it rather arbitrary to amortise the R&D expense (of a new pharmaceutical drug, for example) over only the years it takes to bring this to market? What about the years that it is likely the drug will be marketed in future?
So stock based compensation should be treated as an expense on the income statement but should not be added as a non cash expenses on the cash flow statement?
Dear Sir, I donot agree that recruitment and training expenses should be capitalised because I donot have any control over the employee's level of output. Also I donot have any control on how long he will continue in the company. So it is very difficult to conclude whether the employees i train will be able to generate future cashflows after geeting trained. Hence it is prudent to expense them off.
So what you mean is there is uncertainty whether we will get a return on these investments or not. Well, that is the case with every project. Even if you buy a new machine, you expect it will give a return over the long term, but you never know it catches fire and gets destroyed. Yes, uncertainty with employees is way more. But if you can reasonably estimate how the training program will increase productivity (On average) then whats the issue in capitalizing them.
if you are distracted even by a second, it's gone...blank.
I appreciate the kind efforts.
Regards from Delhi University.
The R&D explanation is beautiful to hear, thank you again!
Hi working in the R&D of an high tech company , I lately was thinking about our product UI (User Interface) - they don't last long, the technology is constantly shifting and you can't find developers that can code your old UI system, after several years you have to re-write your UI. So if we invested 1000 hours into our latest UI, and we know it won't last 15 years, it seems so reasonable to deprecate it just like a do you with a piece of hardware that you buy.
Thanks for all your hard work and dedication.
every word is gold.
Very good explanation. I just want to make sure that when we capitalize leases, both the depreciation of the lease and interest expense will affect the Income Statement. Operating expense will be affected only by the depreciation, but after EBIT, should we deduct interest expense? So then, we involve the same number twice in the income statement? The same is valid with cash flow, as D&A affects operating cash flow, and interest expense affects financing cash flow?
Thank you, professor
this was a great lesson professor,
Great work 👍
Thank you for your teaching!
Thank you for a great series. May I ask why you suggest R&D expenses should only be capitalised over the time it takes to bring the "product" to commercial success? Surely at that point there ought to be the recognition of an intangible asset (the rights to market the new drug or the oil or the content, for example), which should be the PV of estimated future cash flows from these. If the drug proves a failure the asset should be impaired or completely written off; and the PV of oil reserves will presumably always be a function of projected future oil prices, etc.? If so, then isn't it rather arbitrary to amortise the R&D expense (of a new pharmaceutical drug, for example) over only the years it takes to bring this to market? What about the years that it is likely the drug will be marketed in future?
Amazing! Learned a lot from you sir!
So stock based compensation should be treated as an expense on the income statement but should not be added as a non cash expenses on the cash flow statement?
12:39 Let's see which company's Balance Sheet will have the Messi contract debt. 😂
Thank you
Amazing!
Thank you, professor!
Good stuff
Thankyou professor
Dear Sir,
I donot agree that recruitment and training expenses should be capitalised because I donot have any control over the employee's level of output. Also I donot have any control on how long he will continue in the company.
So it is very difficult to conclude whether the employees i train will be able to generate future cashflows after geeting trained.
Hence it is prudent to expense them off.
So what you mean is there is uncertainty whether we will get a return on these investments or not. Well, that is the case with every project. Even if you buy a new machine, you expect it will give a return over the long term, but you never know it catches fire and gets destroyed. Yes, uncertainty with employees is way more. But if you can reasonably estimate how the training program will increase productivity (On average) then whats the issue in capitalizing them.
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