"CSL and other companies with R&D spend are actually required by...

"CSL and other companies with R&D spend are actually required by law to expense R&D when incurred rather than capitalising on the balance sheet, it is an Australian Accounting Standard requirement (AASB1011), the exception to this is software R&D."


@Porkchop Boy,

It's not perfectly clear cut in some cases, and is a function of whether a product in question is in pure Research Phase or Development Phase: Development costs can be deemed to give rise to intangible assets (i.e., capitalised); ditto for certain Research costs which can be argued are highly probable to lead to commercial outcomes based on sufficient precedent (for, example, alteration of medicinal substrates for different delivery mechanisms).


"Another reason for the good result is the improvement in the gross margin on sales. The FY18 gross margin was 53.46% versus 49.68% in FY17. I would attribute this to a combination of volume and price increases in CSL’s products with a hand on costs."

Sure, the sorts of things you have described are indeed determinants of Gross Margin; but there is more to it than just that simplification. Remember that, while CSL's functional currency is US$, and most of its sales are US dollar denominated, the company's main manufacturing centres are in Australia and Switzerland, meaning its operating costs are denominated in non-US dollar terms. Which is why, when the US$ is very strong against other currencies - as it has been over the past 12 months - it assists CSL's Gross Margin. Of course, currency movements are not the only factor (there are others, such a sales mix and raw material costs), but they would have played a not-insignificant part in the FY2018 Gross Margin improvement.


Don't get me wrong; I'm not saying this was a poor result. Far from it.
All I am doing is trying to identify the very few warts in the result, where they exist.

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