Inventory accumulation (allocation)

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81. Most R&D projects take time to complete and therefore it could be argued that there is an accumulation of R&D inventories or work in progress during this period. Once the project has been completed, the inventories could be capitalized. Depreciation estimates would then be based on the productive capital stock.

82. The draft Handbook on Deriving Capital Measures of Intellectual Property Products,24 recommends that own account R&D be capitalized as it occurs while R&D for sale could be recorded as work in progress.

83. Many non-R&D assets in the CSNA that are being built on own account, are immediately capitalized. For example, construction work in progress is allocated to fixed capital in the period it was built and not placed into inventory. R&D, by its nature, is an attempt to add to "the stock of knowledge". From this perspective, R&D should be capitalized as it is undertaken.

84. This study does not place work-in-progress in inventories but rather treats them as part of the investment flow in the period in which the expenditure occurs. This treatment is in step with the international recommendations for R&D in the SNA93 Rev1.


24 . "Aspden, Charles, "Handbook on Deriving Capital Measures of Intellectual Property Product (Software and R&D components), Draft" OECD, 2007."