01-24-2010, 05:11 AM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by lovely</i>
<br />Please answer the following questions;
One of the constraints of conceptual framework for financial reporting, âInformation is material if its omission or misstatement could influence the economic decisions of the users taken on the basis of the financial statements.â
1. Explain the statement in detail with examples.
2. In the context of the above statement, would you capitalize the following items in the accounts of a company? Discuss each item in detail.
a. A box file
b. A computer
c. A small plastic display stand
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Materiality at first place has nothing to do with the capitalization or expensing of a transaction. Any expenditure that meets the capitalization criteria i.e. its economic benefits will be derived for more than one accounting period shall be capitalized.
Coming to the point you seem to have asked; any immaterial expenditure incurred that meets the capitalization criteria may be expensed for simplicity depending upon the accounting policy. Many organizations have the policy to expense capital expenditure below a specific threshold.
Hopefully, I have explained what I intended to.
Regards
Shoaib
<br />Please answer the following questions;
One of the constraints of conceptual framework for financial reporting, âInformation is material if its omission or misstatement could influence the economic decisions of the users taken on the basis of the financial statements.â
1. Explain the statement in detail with examples.
2. In the context of the above statement, would you capitalize the following items in the accounts of a company? Discuss each item in detail.
a. A box file
b. A computer
c. A small plastic display stand
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Materiality at first place has nothing to do with the capitalization or expensing of a transaction. Any expenditure that meets the capitalization criteria i.e. its economic benefits will be derived for more than one accounting period shall be capitalized.
Coming to the point you seem to have asked; any immaterial expenditure incurred that meets the capitalization criteria may be expensed for simplicity depending upon the accounting policy. Many organizations have the policy to expense capital expenditure below a specific threshold.
Hopefully, I have explained what I intended to.
Regards
Shoaib
