Accounting Policy Choice

15th July 2015

Product Development Costs:  CapEx or OpEx ?

Nowadays there are very few areas where accounting standards give you a big choice over what accounting treatment you can adopt. The costs of developing a new product (once it has passed its research phase) are one such area. Tech companies have the choice of accounting treatment – expense as operating costs (OpEx) to P&L, or capitalise (CapEx) to balance sheet and amortise over its predicted useful economic life. Factors to consider:

  1. Accountability,
  2. How bad you are prepared for the P&L to look,
  3. Balance sheet strength (including credit rating),
  4. Maintaining distributable reserves,
  5. Industry norms.

If you are in a dilemma, why not talk it through with us.



 
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