Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 16

Suppose a firm has two different accounting systems. For example, suppose it uses EVA to measure and reward management performance. To calculate EVA, annual spending on research and development is recorded as an asset and then depreciated in calculating earnings. In reporting earnings to shareholders, R D spending in any given year is expensed against earnings.
Describe some of the likely consequences that can arise if the firm tries to maintain two different accounting systems.