Capitalized intangibles and financial analysts

Matolcsy, Z; Wyatt, A

Capitalized intangibles and financial analysts

Matolcsy, Z

Wyatt, A

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Publication Type:: Journal Article
Citation:: Accounting and Finance, 2006, 46 (3), pp. 457 - 479
Issue Date:: 2006-09-01

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Field	Value	Language
dc.contributor.author	Matolcsy, Z https://orcid.org/0000-0001-6566-5079	en_US
dc.contributor.author	Wyatt, A	en_US
dc.date.issued	2006-09-01	en_US
dc.identifier.citation	Accounting and Finance, 2006, 46 (3), pp. 457 - 479	en_US
dc.identifier.issn	0810-5391	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5344
dc.description.abstract	We examine whether firms that capitalize a higher proportion of their underlying intangible assets have higher analyst following, lower dispersion of analysts' earnings forecasts and more accurate earnings forecasts relative to firms that capitalize a lower proportion. Under Australian generally accepted accounting principles, capitalization of intangible assets has become increasingly 'routine' since the late 1980s. It is predicted that this experience leads Australian analysts to expect firms with relatively more certain intangible investments to signal this fact by capitalizing intangible assets. Our results are consistent with this. We find that capitalization of intangible assets is associated with higher analyst following and lower absolute earnings forecast error for firms with a stock of underlying intangible assets. Our tests suggest a weaker association between capitalization and lower earnings forecast dispersion. We conclude that there are benefits for analysts, for management to have the option to capitalize intangible assets. These findings suggest that IAS 38 Intangible Assets and AASB 138 Intangible Assets reduce the usefulness of financial statements. © 2006 AFAANZ.	en_US
dc.relation.ispartof	Accounting and Finance	en_US
dc.relation.isbasedon	10.1111/j.1467-629x.2006.00177.x	en_US
dc.subject.classification	Accounting	en_US
dc.title	Capitalized intangibles and financial analysts	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	46	en_US
utslib.for	150103 Financial Accounting	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Strength - CCG - Centre for Corporate Governance
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	46	en_US

Abstract:

We examine whether firms that capitalize a higher proportion of their underlying intangible assets have higher analyst following, lower dispersion of analysts' earnings forecasts and more accurate earnings forecasts relative to firms that capitalize a lower proportion. Under Australian generally accepted accounting principles, capitalization of intangible assets has become increasingly 'routine' since the late 1980s. It is predicted that this experience leads Australian analysts to expect firms with relatively more certain intangible investments to signal this fact by capitalizing intangible assets. Our results are consistent with this. We find that capitalization of intangible assets is associated with higher analyst following and lower absolute earnings forecast error for firms with a stock of underlying intangible assets. Our tests suggest a weaker association between capitalization and lower earnings forecast dispersion. We conclude that there are benefits for analysts, for management to have the option to capitalize intangible assets. These findings suggest that IAS 38 Intangible Assets and AASB 138 Intangible Assets reduce the usefulness of financial statements. © 2006 AFAANZ.

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http://hdl.handle.net/10453/5344