Reassessed Earnings with Capitalized Intangibles
SSRN Electronic Journal
2024
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
This paper examines whether and how the capitalization of in-house intangible investments would alter the assessment of firm profitability and the qualitative attributes of earnings. We find that the percentage of loss-reporting firms declines, and that earnings and operating cash flows dramatically increase. Reassessed profits and losses better map with positive and negative stock returns, respectively. Reassessed profits and losses also better map with firm survival and failure, respectively. Qualitative attributes of earnings improve—expenses are better matched with contemporaneous revenues, earnings become less volatile and more persistent, and the earnings-to-price ratios provide better signals for value investing. These findings suggest that capitalization of intangibles improves the assessment of firm profitability while enhancing the usefulness of earnings measures. However, caution is advised in interpreting these results because the greater likelihood of earnings management and the increased frequency of intangible impairments are not examined in this paper.
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