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The Georgia Tech Financial Analysis Lab conducts unbiased research on issues of financial reporting and analysis. Unbiased information is vital to effective investment decision-making. Accordingly, we think that independent research organizations, such as our own, have an important role to play in providing information to market participants.

Because our lab is housed within a university, all of our research reports have an educational quality, as they are designed to impart knowledge and understanding to those who read them. Our focus is on issues that we believe will be of interest to a large segment of stock market participants. Depending on the issue, we may focus our attention on individual companies, groups of companies, or on large segments of the market at large.

A recurring theme in our work is the identification of reporting practices that give investors a misleading signal, whether positive or negative, of corporate earning power. We define earning power as the ability to generate a sustainable stream of earnings that is backed by cash flow. Accordingly, our research may look into reporting practices that affect either earnings or cash flow, or both. At times our research may look at stock prices generally, though from a fundamental and not technical point of view.


Accounting Practices in the Software Industry, 2014 and 2015

January 2016

For software companies, all software development costs incurred prior to technological feasibility are expensed as R&D. Once technological feasibility is reached software development costs are capitalized up to the point of completion and product release. At this point, amortization of capitalized costs begins.

Determining technological feasibility and the timing of software development completion entails management judgment, creating flexibility in capitalization policies. Given this flexibility, it can be difficult to compare financial results across firms in the software industry. The purpose of this study is to survey policies for software development capitalization during 2014 and 2015 (fiscal years ending between July 1, 2014 and June 30, 2015). The results are then compared with similar studies conducted in 2006 and 2010.

Overall, 61% of the software companies in the sample expensed all software costs incurred. Of the remaining 39% that capitalized costs, the average percentage of software costs incurred that were capitalized was 18.1%. These results show a small shift from the 2006 and 2010 studies where approximately 70% of the sample expensed all software costs incurred. In addition, in the 2006 and 2010 studies, the companies that capitalized software costs had an average rate of capitalization of 20% and 15%, respectively.

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View Past Reports


Earnings Quality: Reports on Individual Companies and Industries

In these reports we examine one or more dimensions of earnings quality: the cash flow support of earnings, the sustainability of earnings, or the quality of the balance sheet.


EQI, The Cash Flow Support of Earnings: Industry Review, 01.08.13


EQI, the Cash Flow Support of Earnings:  Homebuilding Industry, 04.23.15


The Sustainability of Earnings: Selected Companies, 12.09.14


EQI, The Cash Flow Support of Earnings: Industry Review, 03.02.15


Excel Spreadsheets of Cash Flow Data and Graphs by Industry

Quarter 2, 2015

0. All Industries (non-financials)
1. Agriculture
2. Food Products
3. Candy & Soda
4. Beer & Liquor
5. Tobacco Products
6. Recreation
7. Entertainment
8. Printing & Publishing
9. Consumer Goods
10. Apparel
11. Healthcare
12. Medical Equipment
13. Pharmaceutical Products
14. Chemicals
15. Rubber & Plastic Products
16. Textiles
17. Construction Materials
18. Construction
19. Steel Works
20. Fabricated Products
21. Machinery
22. Electrical Equipment

23. Automobiles & Trucks
24. Aircraft
25. Shipbuilding & Railroad Equipment
26. Defense
27. Precious Metals
28. Non-metallic & Industrial Metal Mining
29. Coal
30. Petroleum & Natural Gas
31. Utilities
32. Communication
33. Personal Services
34. Business Services
35. Computer Hardware
36. Computer Software
37. Electronic Equipment
38. Measuring & Control Equipment
39. Business Supplies
40. Shipping Containers
41. Transportation
42. Wholesale
43. Retail
44. Restaurants