Headquartered in Montreal, Quebec, Canada, Bombardier, Inc, is a multinational aerospace and transportation company, founded in 1941. The company manufactures regional aircraft, business jets, mass transportation equipment, recreational equipment and is a financial services provider. Bombardier is a Fortune Global 500 company and operates two segments: BA (Aerospace) and BT (Transportation).

a. Compute the percent of revenues that Bombardier spends on research and development (R\&D) for both years. Determine the year over year growth in R\&D expense. Compare this level of expenditure with the percentages for other companies that are discussed in the Business Insight box on page 5-4. How would you assess the appropriateness of its R\&D expense level?

b. Describe how Bombardier accounts for R\&D expenditures. How does this differ from U.S. GAAP accounting?

c. What would Bombardier have reported for R\&D expense for 2012 and 2011 if the company had always used U.S. GAAP? Use these numbers to determine the common-size R\&D expense and the year over year growth in R\&D expense. How does this compare to your answer in part \(a\) ?

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In millions of U.S. dollars Revenues Cost of sales.. Gross margin SG&A. R&D Share of income of associates. Other income Special items EBIT..... Financing expense Financing income. BOMBARDIER INC. CONSOLIDATED STATEMENTS OF INCOME For the fiscal years ended December 31 EBT...... Income taxes Net income. Attributable to: Equity holders of Bombardier Inc. NCI... 2012 $16,768 14,269 2,499 1,443 299 (45) (33) 140 695 596 (599) 698 100 $ 598 $ 588 10 $ 598 2011 $18,347 15,444 2,903 1,439 271 1,202 681 (519) (4) (5) 1,040 203 $837 $ 837 $ 837