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Can we capitalize the cost of redesigning our menus? We expect the new design to be used for 3 to 5 years.

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Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

I would say "yes". A purchased or developed intangible with an estimable cost and life (I assume you are talking about restaurant menus?), that is going to be used in delivering goods and services to customers seems a slam dunk. This is treating the item as a part of the delivery process, and not a marketing collateral (which is more usually expensed). This is an intangible good that I haven't touched yet, so *please correct* if this is a corner case.

You certainly don't have to do so...until it is ready to go it is expensable.

This begs the questions, why and precedent? You'll be setting a precedent for captializing things like this, and that could prevent you from expensing it in the future. Is there a material reason for doing this?

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Thank you Keith for asking that important question - why capitalize. I find many people trying to build up their balance sheet with items that if given to an intelligent lender or investor would be a negative rather than an asset. (sorry for the pun).

Regardless of GAAP, which really needs to be reworked to show reality in our balance sheets, items like leasehold improvements, pre-paid expenses (sans deposits which can and will be reclaimed) and such give no value when its time or a loan.

Then again the concept of historical cost is great, but no where in the financials do we put the FMV of these historical costs. How are we fairly representing the financial health of our company?

Philip Russell
Title: CFO
Company: FCB Homes
(CFO, FCB Homes) |

Is it material? It probably is not material to your company and should be expensed. It is also better to expense it now in case you change your mind and don't use the menus for your planned 3-5 year time horizon.

Topic Expert
Vernon Reizman
Title: CFO
Company: RCM Industries, Inc.
(CFO, RCM Industries, Inc.) |

I believe your question is not the reasons pro and con for expense vs capitalize but simply "can" you. Assuming you are an ongoing operation this design cost would be something you "can" capitalize should you choose to do so. You will need to determine a fair life expectancy (looks like 4 years is what you are thinking) and as pointed out by Keth you will need to be consistent with this policy going forward or it will be deemed an accounting change.

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