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abnormal costs

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › abnormal costs

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by Stephen Widberg.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • March 11, 2021 at 3:19 pm #614194
    Noah098
    • Topics: 936
    • Replies: 352
    • ☆☆☆☆☆

    sir what is the rational for not capitalising abnormal costs? I know it perhaps relates to FR but still if you could clear it, it will be great!

    thanks in advance!
    sincere regards,

    March 12, 2021 at 11:46 am #614275
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2531
    • ☆☆☆☆☆

    If it’s an expense, and you capitalise it (i.e. add it to assets), we will all end up in prison – I think that may be what happened to Worldcom………….but don’t sue me.

    March 30, 2021 at 12:48 pm #615512
    Noah098
    • Topics: 936
    • Replies: 352
    • ☆☆☆☆☆

    sir but we do capitalise any normal material or labour costs, which are expenses themselves, if they have been incurred in the construction of an asset. then why this animosity towards abnormal costs is my question?

    March 31, 2021 at 12:08 pm #615595
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2531
    • ☆☆☆☆☆

    Assets must not be overstated – that’s the starting point.

    When I was an auditor I once damaged some client stock in an accident with a fork lift truck, so they had to spend money repairing the stock. You don’t want all those extra costs being added to assets.

    And, of course, it is required by the standard!

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