The pharmaceutical industry has been criticised in the financial press for recognising excessive profits and investing less in research and development that the government is threatening the removal of tax concessions to the industry.Under these conditions,PAT predicts that pharmaceutical companies are subject to ___________ costs and are likely to adopt _________________ accounting policies:

Question

Quizplus · Accepted Answer

The government's threat to remove tax concessions due to perceived excessive profits and underinvestment in research and development is a political factor. Under such political pressure, pharmaceutical companies are likely to adopt income decreasing accounting policies to reduce their tax burden and alleviate criticism of their profits. This would also help to counter the negative public perception that they prioritise profits over patient healthcare. Therefore, option D - Political; income decreasing - is the most accurate answer.

The Pharmaceutical Industry Has Been Criticised in the Financial Press