Last Updated 25 May 2020

Accounting treatment for capitalizing

Category Accounting 
Essay type Research
Words 576 (2 pages)
Views 288

Thank you for CA for accounting treatment in regards to your venture capital stake in Historiographers (Western). In our introductory meeting, you requested this firm to research on the accounting treatment for capitalizing the accumulated Meatball marketing consultancy charges uncured and the staff salaries.

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. In addition, I have also reviewed the documents provided to this firm during our earlier meeting. Facts The facts as was provided to us are as follows: Western hired a high-priced marketing consultancy company, Medievalist, to come-up with an integrated marketing strategy for computer game "Project. " Medievalist was tasked to develop a very catchy slogan that Western will use in a multimillion dollar advertising campaign long with other things.

Before the winning slogan was developed, they had presented others that Western rejected as unsuitable for Project's image. Therefore, Western has Incurred a marketing expense of $750,000. Western wants to capitalize charges for the rejected phrases but they reason that the rejected phrases were an integral part of developing the winning slogan. Western will also capitalize the costs of staff salaries of $300,000 for the time they spent in meetings with Medievalist. Western intends to amortize the capitalized amounts over the expected product-life f the game.

Applicable Codifications The applicable codifications from Financial Accounting Standards Board (FAST) which addresses Westerns plans to capitalize the accumulated Medievalist charges and capitalize the staff salaries are as follows. Codification paragraph 720-15-55-3: The following costs that might be incurred in conjunction with start-up activities are subject to the provisions of this Subtopic a. Travel costs, employee salary-related costs, and consulting costs related to feasibility studies, accounting, legal, tax, and governmental affairs.

Codification paragraph 720-15-45-1: Because is marketed to others, the expense shall be charged to cost of sales or a similar expense category. Codification paragraph 720-15-45-2: In an entity's balance sheet, capitalized software costs having a life of more than one year or one operating cycle shall be presented as another asset because the costs are an amortize intangible asset. Analysis Based on the provided facts of your venture stake in Western, it is clear that charges incurred through a consultancy contract with Medievalist is a part of the product placement under the implementation guidance paragraph.

In addition, the staff salary is also a part of the implementation guidance paragraph as well. Recommendation Due to the shortness of time to turn this research project around, I suggest that we see the more detailed invoices from Medievalist along with the billable hours of the staff salaries allocated to working on the marketing development of a catchy slogan. Please call me at (415) 297-8060 , if you have any further questions concerning these findings.

I also suggest that a follow up meeting next week to discuss the additional accumulation which may be needed to better conclude this research into the accounting treatment of your situation

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Accounting treatment for capitalizing. (2018, Jan 07). Retrieved from https://phdessay.com/accounting-treatment-for-capitalizing-2/

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