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Can a company capitalize labor cost related to the creation and the development of creative materials? (books, screen plays etc.)

nick stevens's Profile

As a company assigns labor time to these creations they are wanting to capitalize that labor cost. Is that appropriate? Direction to codification would be awesome!

Answers

Lewis Turner Jr
Title: Treasurer/ CPA
Company: Public Utilities Reports, Inc/ Self
(Treasurer/ CPA, Public Utilities Reports, Inc/ Self) |

Nick,I can't direct you to the codification. But, I've worked for a publisher for 20 years. and, capitalizing the labor costs (editing, proofing, etc.) into the creative works of the authors and training manuals was always done.

Some of the years we engaged CPA Firms to conduct financial audits and no question about the practice was ever raised. 263A calcs were prepared (yuck!), so, the auditors were fully aware of all the elements being capitalized.

IMO, If you don't capitalize the labor costs, you're not really capturing the true cost of what's being produced. What if the author of the manuscript forwards you complete garbage. It can't go to the printer (or co. who will create the digital copy) without significant changes.

D G
Title: Fixed Asset Accountant
Company: Retail
(Fixed Asset Accountant, Retail) |

Yes, this is appropriate treatment. Most ancillary items that bring an asset into service are capitalized excepting a few conditions.

See ASC 350-10 & ASC 350-30 - treatment of intangibles outside of goodwill. You might find ASC 360 a little useful in theory - treatment of PPE

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