The Accounting Review Vol. 34 No. 4 1959
THEORY AND PRACTICE IN THE CAPITALIZATION OF SELLING COSTS.
Abstract
The article focuses on the capitalization of non-factory costs under appropriate conditions. Non-factory costs may be divided into two separate classes for analysis from the point of view of possible deferral on the balance sheet. The author believes that it is sound in theory, and, within limits, desirable in practice. The applications in practice should be limited to introductory advertising or similar large and non-recurring expenditures. For one thing, capitalization of costs would have far less effect on reported net income on a company-wide basis than it would have on product and product line contribution or net income figures. Also, it would require an additional item in the reconciliation of reported net income to taxable income. On the other hand, the potential effect of capitalization on reported net income or contribution of business segments could be very substantial. Approximations of management intent for recovery of investment are offered as a basis for amortization on internal new product and other segment reports.
- DOI
- 10.2308/tar-7057829
- Volume
- 34
- Issue
- 4
- Pages
- 564-569
- Language
- en
- Sources
- openalex crossref