In accounting the cost of goods accounted for on the balance sheet of the company, if the company plans to obtain product over a long period of time. And not costs, the cost of goods or fixed assets, kapitaliserede and amortiziruemoe or depreciated over its useful life.
Typical examples of the cost of corporate costs associated with the construction of the asset, and may include materials, taxes, labour, transportation and interest incurred to Finance the construction of fixed assets. Costs associated with intangible assets can be capitalized; these include trademarks, registration and protection of patents, software Development.
Criteria Of Capitalization
To capitalize costs, the company should reap the economic benefits from the asset(s) for the current year and use items in the course of their activities. For example, inventory may not be capital assets as companies Usually expect to sell their stocks during the year.
Because amortiziruemoe capitalised and written off over a period of years, their impact on the income statement of the company not immediately, but instead over the useful life of the asset. As a rule, the cash effect of cost of capital cost immediately with all the subsequent depreciation or amortization of non-cash charges.
Fixed Assets Capitalized Costs
Companies often incur costs associated with the construction of the asset or putting it into Use. Such costs may be capitalized and included as part of the cost of fixed assets.
If the company raises funds for the construction of the asset, such as real estate, are charged interest expense, the financing cost allowed to be capitalized. In addition, companies can benefit and other costs such as labour, taxes, transportation, testing and materials used in the construction of capital assets. However, after the OS is installed for use, any subsequent maintenance costs should be expensed as incurred.
Intangible Assets Capitalized Costs
Companies are permitted to capitalize costs related to trademarks, patents and copyrights. Capitalization is allowed only for expenses incurred for the protection or registration of a patent, trademark or similar intellectual property successfully. In addition, the company can capitalize costs they incur to buy the trademarks, patents and copyrights.
The company is allowed to capitalize the costs of developing new software applications if they reach technological feasibility. Technological feasibility is achieved once all the necessary planning, programming, designing and testing the software meets its technical specifications.
When a company cannot demonstrate the link between cost and future income, such costs must be expensed. In the case of software development, any related costs incurred prior to achieving technological feasibility are expensed. Expenditure on research and development is another example of current expenditures because of the high risk and uncertainty of future benefits from such expenditure.