Case Facts SKA ( Sweden )

- Company dedicated to development, manufacture, and sale for electronic equipment for the
military and civil use.
- Founded in 1980 with initial good financial results. Since 1985, Company started to reporting
loses due to lack of innovation of their products.
- To overcome the bad results of the company, It was proposed to launch an aggressive R&D plan.
This strategy involved the expenses of $1.5 MM, an amount higher that any expenditure the
company had had in the past.
- The accounting approach to this expenditure ( Capitalize vs. Expense) would make a difference
between showing a small profit or a big loss in the income statement for the company along the
existence of this new project.
- Management committee got together to discus what would had been the pros and cos of each of
the approaches.