Chapter 8 showed how conservative accounting for particularly risky investments conveys risk. It does so by expensing those particularly risky investments against earnings rather than putting them on the balance sheet with the pretense that there is a credible asset. R&D is one of those investments, though only R is expensed under IFRS. How risky is R&D?
Only 0.02% of drugs that enter preclinical testing make it to market and only 20% to 30% of those cover their cost, according to the Wall Street Journal, December 5, 2024, p. A16. A review of R&D success rates by the Geneva Graduate Institute Global Health Centre is at https://www.knowledgeportalia.org/r-d-time-and-success-rate#:~:text=Phase%20I%20to%20Phase%20II,was%20estimated%20to%20be%2011.83%25.