According to the Australian Accounting Standards (AASB 138 Intangible Assets), companies are required to not capitalize on research expenditures instead treating them as expenses and consequently presenting them in the income statement. 

Requirement:

1) Building on the three main components of the Positive Accounting Theory, provide your prediction and discuss which companies are likely to have a preference of capitalizing research expenditure rather than expenses.

2) Discuss the potential investigation or studies for researchers to test your predictions.

Answer rating: 100% (QA)

The Positive Accounting Theory PAT is a framework that seeks to explain and predict the choices made by firms in financial reporting and accounting practices It primarily revolves around three main co... View the full answer