Should Intangible Investments Be Reported Separately or Commingled with Operating Expenses? New Evidence

Management Science, Forthcoming

Tuck School of Business Working Paper No. 2715722

49 Pages Posted: 16 Jan 2016 Last revised: 4 Apr 2018

See all articles by Luminita Enache

Luminita Enache

University of Calgary; Dartmouth College - Tuck School of Business

Anup Srivastava

University of Calgary - Haskayne School of Business

Date Written: January 17, 2017

Abstract

We propose a new method to estimate intangible investment outlays, other than expenditures on advertising and research and development, that are reported on a commingled basis with operating expenses in the selling, general, and administrative (SG&A) category of expenses. These outlays, aimed at improving organizational knowledge and capabilities, are the largest category of intangible investments and the fastest-growing category of operating investments. They affect future firm performance and risk. Predictability of future earnings and stock returns improves when these outlays are distinguished from operating expenses. Thus, benefits could accrue from reporting them separately.

Keywords: SG&A; mandatory disclosures; intangible investments; R&D; organizational capital; risk-return trade-offs; fundamental analysis; stock returns

Suggested Citation

Enache, Luminita and Srivastava, Anup, Should Intangible Investments Be Reported Separately or Commingled with Operating Expenses? New Evidence (January 17, 2017). Management Science, Forthcoming, Tuck School of Business Working Paper No. 2715722, Available at SSRN: https://ssrn.com/abstract=2715722 or http://dx.doi.org/10.2139/ssrn.2715722

Luminita Enache (Contact Author)

University of Calgary ( email )

140 Scanlon Green NW
Calgary, Alberta T3L1N3
Canada
5874389015 (Phone)

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

Dartmouth College - Tuck School of Business ( email )

140 Scanlon Green NW
Calgary, Alberta T3L1N3
Canada
5874389015 (Phone)

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

Anup Srivastava

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

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