A reply to "A comment on the valuation of R&D firms with R&D limited partnerships." (J.K. Cheung and M. Li's article in 'The Accounting Review,' April 1992, vol 67)
Article Abstract:
The variety of formulas for the value of the asset (LPCA) component and the liability (LPCD) component of a call option for R&D limited partnerships are argued to have resulted from varying economic interpretations. What differentiates the original formulation from Cheung and Li's formulation is that the original focuses on the R&D firm's process of balance sheet construction as executed by investors. It is asserted that the superiority of one formula over the other is difficult to ascertain. It must be reemphasized though, as Cheung and Li have previously stated, that the original evidence is in line with equity market prices being reflective of disclosed information regarding the interests of R&D firms in R&D limited partnerships.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1992
User Contributions:
Comment about this article or add new information about this topic:
The valuation of R&D firms with R&D limited partnerships
Article Abstract:
The SEC and the Financial Accounting Standards Board (FASB) are concerned with financial arrangements that carry commitments that are not reported as liabilities on financial statements. One such off-balance sheet financing vehicle are R&D limited partnerships (LPs). The SEC and FASB have taken the position that R&D firms with LPs should disclose the existence of the LP and the amount raised. Research to ascertain whether investors view R&D LPs as increasing the assets and liabilities of R&D firms when assessing the R&D firms' equity value was conducted. Research results support the SEC and FASB positions that the existence of and amount raised through an R&D LP should be disclosed, but not necessarily on the balance sheet.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
User Contributions:
Comment about this article or add new information about this topic:
Taxes and off-balance-sheet financing: research and development limited partnerships
Article Abstract:
Limited partnerships in research and development (R&D) represent a fairly recent alternative to more typical equity and debt R&D funding. An empirical and economic analysis is presented of the motivating factors behind corporate selection of limited partnerships as funding sources. The analysis employs a framework based on existing capital structure models and agency theory to derive hypotheses that can be tested empirically. Empirical test results are consistent with both a tax motivation, and to a smaller degree, an off-balance-sheet motivation for companies to utilize a limited partnership for funding R&D costs. More generally, results and analysis imply support for agency model predictions.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1987
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: An examination of the influence of middle-level managers in formulating and implementing strategic decisions. Strategic decisions made by top executives and middle managers with data and process dominant styles
- Abstracts: Human resource management and industrial relations. HRM and Critical Social Science Analysis. Mapping management styles in employee relations
- Abstracts: Predicting audit qualifications with financial and market variables. The effect of informedness and consensus on price and volume behavior
- Abstracts: Simulation evidence and analysis of alternative methods of evaluating dollar-unit samples. part 2 Dollar-unit sampling: a comparison of the quasi-Bayesian and moment bounds