I get quite a few requests for books to read on investing and am quite bored of typing out the same sort of response each time. So I decided to develop a page of my website that goes through what I think are the most crucial books and letters to study in order to become a better investor. Although it is aimed at novice investors, if there is anything more experienced investors haven’t read then I do still recommend them, even if it’s just to reinforce what you already know. I’m going to treat this as a work in progress and add or change things over time.
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Investing Sidekick
Founder of Investing Sidekick. Works as a research analyst and is an avid value investor, always searching for undervalued shares.
Hi Andy,
I was wondering if you had any thoughts on R&D expenses. According to accounting principles R&D is a operating expense but shouldnt R&D we a capital expense and therefore be amortized over the lifetime of the asset?
Hi Deepti
It depends on what the R&D relates to in my opinion, but both scenarios can be used legitimately under IFRS as I understand it.
For example a company developing some new software could quite legitimately capitalize R&D costs until it goes on sale, then amortize them. However a lot of companies like Apple or Microsoft will just expense R&D in order to reduce net profit and hence taxes payable.
I tend to focus on free cash flow over time, and will deduct R&D cash expenses, if they are being capitalized, in the calculation.