Contributions of Advertising Assets and R&D Assets to the Market Value of the Firm
Advertising expenses and research and development expenses are usually treated as operating expenses that affect current income. This study presents research results based on financial market data indicating that they should be viewed as capital investments. The estimated economic lives in whole years for advertising expenses is two years and for research and development expenses is nine years. This study indicates that substantial amounts of unrecorded advertising assets and unrecorded research and development assets exist. The portions of the market value of the firm attributable to recorded tangible assets, recorded intangible assets, unrecorded advertising assets, and unrecorded research and development assets are estimated. A significant portion of the market value of the firm is attributable to unrecorded advertising assets and unrecorded research and development assets. Investments in unrecorded advertising assets and unrecorded research and development assets are found to have higher levels of productivity in terms of producing value added for the firm's investors than do investments in recorded tangible assets and recorded intangible assets.