Question
Responsibility Accounting Background: There is a well known secret in the accounting world regarding Research and Development costs in the Pharmaceutical Industry. R&D costs under
Responsibility Accounting
Background: There is a well known "secret" in the accounting world regarding Research and Development costs in the Pharmaceutical Industry. R&D costs under GAAP must be expensed every month (as oppose to capitalizing them as IFRS does). As such, companies are getting hit on their Net Income (profit) figure month after month until a drug reaches the market. All of this translates into high prices for new drugs (costs passed on to the consumer for a number of years) until companies basically get their investment back (the lower taxes they paid during past years do not compensate for the impact on profit).
Based on the principles of Responsibility Accounting, what type of Performance Evaluation System will you institute as a manager in a pharmaceutical business? Your suggest what would work but also what will not work and why (general statements like "I will make sure that a short term focus is avoided" will not be accepted).
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