Research and development is significant for industrials as they seek to improve on the designs of their products.

In countries which use IFRS, such as in Europe r and d may have high capitalization rates.

This is because r and d in industrials is often fine-tuning existing products.

We'll think about life sciences versus industrials to understand this.

Pharmaceuticals players spend a lot of their time researching entirely new technologies, and consequently, they do a lot of expensing of their considerable r and d spend.

An engine maker is more likely looking to improve on efficiency.

They're not inventing the engine and what they're doing has a really clear use case.

This means they qualify as development and they can capitalize their expenses.

This can cause comparability issues when comparing to US GAAP in US GAAP R and D is expensed other than in some very specific cases such as software and media care should be taken when comparing industrial companies from different countries to understand their approach as the impact on valuations can be large.