Advanced Auditing Ch.7 Summary.docx - Gary Livak Chapter 7 Summary This chapter focuses on aggressive cost capitalization and extended amortization

Advanced Auditing Ch.7 Summary.docx - Gary Livak Chapter 7...

This preview shows page 1 - 2 out of 2 pages.

Gary Livak Chapter 7 Summary This chapter focuses on aggressive cost capitalization and extended amortization policies. Based on the matching principle costs incurred that benefit future periods should be capitalized and amortized to expense over the periods that benefit. That is the correct way for a company to capitalize items and provide themselves with considerable accounting flexibility. A few examples of some costs that can be capitalized are: 1. Software development costs 2. Capitalized interest 3. Direct-response advertising 4. Policy acquisition costs A few examples of some costs that should not be capitalized are: 1. Start-up activities 2. Research and development 3. Advertising and selling 4. General and administrative expenses The SEC has begun cracking down on companies that over aggressively capitalize assets. The following 4 ways are used in detecting aggressive capitalization policies: 1. Carefully consider a company’s capitalization policy 2.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture