Empirical literature on accounting choices and the use of discretion when accounting for R&D seems to be abundant. However, most of these studies investigate the accounting behaviour of public firms. General research on accounting choices in public and private companies, in contrast, often suggests that incentives for accounting choices in private firms largely differ from those made by public firms due to differences in the group of financial statements’ users. While public companies are driven by capital market forces, private businesses are assumed to be driven mainly by tax and dividend incentives. Hence, empirical evidence on the capitalisation of development costs in public companies cannot be transferred to the context of non-listed companies. Considering their economic importance worldwide and the overall sparse empirical accounting literature covering this sector, our paper investigates the accounting choice of capitalising development costs for private companies in Germany. As this specific accounting option provided by the German Commercial Code has neither an influence on taxable income nor dividend payments, the German context offers an interesting setting for evaluating the drivers of accounting choices in private companies. Based on a sample of 586 large and medium-sized private companies preparing their financial statements in accordance with German GAAP, we find that in the absence of tax and dividend incentives, the determinants for capitalising development costs in public and private firms are similar. Comparable to the results for listed companies, we find private companies to be driven mainly by incentives from debt contracting and the need to ameliorate financial numbers in case of low profitability and negative income. Nevertheless, in contrast to public firms, private companies seem not to be impacted by agency conflicts and the pressure of political costs. Furthermore, we investigate whether private companies would rather use the capitalising option in order to inform their financial statements’ users about the high earnings potential of their R&D or capitalise development costs simply to ameliorate financial numbers, thus misleading their stakeholders as to their true overall performance and success in R&D. We created a matched sample of companies differing solely in regard to R&D success. Our findings show that if companies are otherwise similar, R&D success has no significant impact on the capitalising decision, suggesting that there are companies both using the capitalising option opportunistically and also informing their financial statements’ users.