- April 19, 2020 at 10:54 am
hi, need some clarification.
the question is kinda dumb…but i cant stop thinking about it
amortization and depreciation of assets: begin when asset is available for use, NOT when it is actually used
capitalized development cost: depreciated when commercial production begins, not when available for use.
if so, does that mean that the matching/accrual concept is only applied for the capitalized development cost (if the asset isnt immediately used when available)?April 19, 2020 at 7:57 pm
The matching concept ensures that if the asset is generating income then there is a corresponding cost recognised in relation to the use of the asset.
For the first point, if the asset is not being used to generate income then it is effectively making losses and so we should be recognising the depreciation/amortisation to show this under the matching concept.
For the second point, the matching concept is also being applied but at a slightly later point. It is taken that the asset needs to be used prior to commercial production starting, when revenue is then generated. So no expense is recognised until that point given that it is a new idea/product that is being generated.
ThanksApril 20, 2020 at 6:50 am
it is clear now. thank you!
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