Why R&D Expensing Makes Earnings Look Smaller: What Founders Need to Know

R&D expensing makes reported profits understate earning power, Dino Palazzo of the Federal Reserve Board argues in a 2026 working paper; with special items, it helped cut GAAP earnings from 82.8% to 66.4% of adjusted earnings. What FASB Statement No. 2 requires, what the data show, and how to explain an R&D-heavy loss.








