We use a simulation model for a pharmaceutical R&D program to examine the tradeoff between objectivity and relevance of accounting information under various methods of R&D reporting. A simple capitalization rule, similar to the successful-efforts method of capitalizing oil and gas exploration costs, provides a stronger relation between accounting information and economic values than immediate expensing of R&D outlays or capitalizing the full cost of outlays. The superior relevance of this "successful-efforts" method persists even when earnings management is widespread.

The Journal of Accounting Research publishes original research using analytical, empirical, experimental, and field study methods in accounting research. The journal had been published since 1963 by the Accounting Research Center (ARC) at the University of Chicago Booth School of Business. Beginning in 2001, the Journal of Accounting Research has been published by the ARC in partnership with Wiley Publishing. JSTOR provides a digital archive of the print version of Journal of Accounting Research. The electronic version of Journal of Accounting Research is available at https://onlinelibrary.wiley.com/journal/1475679x. Authorized users may be able to access the full text articles at this site.

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