We investigate the value-relevance of capitalised R&D on the balance sheet, and the extent to which R&D accruals improve the association between accounting-based measures of firm performance and capital market returns for Australian listed companies. This is a regulatory setting where management discretion in the capitalisation decision is permitted and can be empirically observed. Our results suggest that capitalised R&D on the balance sheets of selective capitalisers is value-relevant; that is, the ability of capitalised R&D to explain information contained in prices (given information conveyed by other components of the balance sheet) is statistically significant. For the same group of firms R&D accruals (particularly the initial capitalisation) improve accounting earnings as a measure of performance but only for the pooled sample using contemporaneous returns. The results for the fully expensing sample are less clear, perhaps due to the small sample size.