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Question :Grape 12/09
The net profit of the FS was 400,000.
Training cost of 500,000 was capitalized .
I gathered this is therefore materially misstated as the training should have been expensed, however as the adjustment would result in the company now being at a loss instead of profits, does this make it pervasive?The fact that it substantially changes net profit I would say it is pervasive since it could render the fs statements on a whole misleading. I would also add that it is material not only but size i.e 500/400 = 125% but it is also material by impact since it changes the profit from a positive to a negative. I base my argument on a discussion i had with a senior at a big 4 firm who said one way it would be pervasive if it has a huge effect on profit.
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