Unformatted text preview: 3. Some expenses are assigned to the specific accounting period on the basis of systematic and rational allocation of asset cost. Explain the underlying rationale for recognizing expenses on this basis. “Systematic and rational” allocation of asset cost include depreciation of property and equipment and amortization of intangibles. This policy is used for the costs that are hard to adopt some reasonable association with revenue so this allocation policy is used to approximate the matching principle. Most times this expense recognition pattern involves assumptions about the benefits received and the costs associated with those benefits, for example the long lived asset must be allocated over all of the accounting periods of its useful life because the asset contributes to the generation of revenue throughout its useful life....
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- Winter '10
- Depreciation, Generally Accepted Accounting Principles, Terri Chichester