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IAS 38 para 15 states
“An entity may have a team of skilled staff and may be able to identify
incremental staff skills leading to future economic benefits from training. The
entity may also expect that the staff will continue to make their skills available
to the entity. However, an entity usually has insufficient control over the
expected future economic benefits arising from a team of skilled staff and from
training for these items to meet the definition of an intangible asset. For a
similar reason, specific management or technical talent is unlikely to meet the
definition of an intangible asset, unless it is protected by legal rights to use it
and to obtain the future economic benefits expected from it, and it also meets
the other parts of the definition”.
but in Para 69 (b) it is stated that “expenditure on training activities” will be recognised as expense.
would you please tell me “whether training costs incurred on employees who have signed a bond to serve the organization for future years” should be capitlised?I’m not sure that such a binding agreement would be upheld by a Court. To do so would be to restrict an employee from using their acquired skills in whatever way they want – it would be an unconscionable restriction of human rights.
In addition, we are not able to determine with reasonable certainty the life expectancy of these employees.
I think, on balance, I would argue strongly against the capitalisation of training costs because of the inability to “control” the employees (an asset arises from some past events and is under the control of the company” and I don’t believe that a “binding contract” constitutes “control”
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