The capitalization of Research and Development expenses

To better reflect economic reality and because of progress made in statistical sources and methods, the revised European System of Accounts (ESA 2010) changes the treatment of Research and Development (R&D) expenses in national accounts. Research and Development (R&D) is now recognized as a fixed asset which does not disappear in the production process. In other words, the R&D expenses of the economy are no longer recorded as intermediate consumption, but as capital formation.

Two pilot exercises conducted by Eurostat have shown that the impact of this methodological change would lead to an increase of 1.3 % of the GDP of Luxembourg and of 4.7 % of its capital formation. Among all methodological changes of ESA 2010, capitalization of R&D expenses has the most important impact on GDP.