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Plenty of things you can’t sell get capitalized, recoverability isn’t a particularly important aspect for capitalizing something.
by cstejerean 8y ago
Plenty of things you can’t sell get capitalized, recoverability isn’t a particularly important aspect for capitalizing something.
- jsmith99 8y agoAt least under international GAAP, assets can only be capitalised if they are expected to deliver future economic benefits. This doesn't mean that they have to be sold directly - they can be internal benefits such as a building or a factory machine that makes it cheaper to produce goods.
- cstejerean 8y agoIndeed, that’s what I was trying to say as well. The asset needs to have value to the firm in terms of future benefits but doesn’t need to be sellable on its own.
- toasterlovin 8y agoHow would you deal with spending a bunch of money on redesigning a company's website (in practice, as opposed to in theory)? On the one hand it has a lot of similarities to making improvements to a retail location (which would typically be amortized). On the other hand, my experience (not as an accountant, but as someone who has been exposed to accounting in small business contexts) is that that would typically get booked as an expense.
- jsmith99 8y agoIt would be capitalised as an intangible asset. In practice I assume a small company might not bother, especially if the website was built by their own staff, but the clients I worked on seem to get charged quite a lot for outsourced IT work so they would certainly want to capitalise it.
- toasterlovin 8y agoI'm curious if you have any examples off the top of your head. Not trying to be combative, but I'm genuinely drawing a blank here.