We are currently in court arguing a lease with a landlord. I do not know the specifics of the case but I am told we will most likely win. My boss wants to capitalize the legal expenses incurred to secure this lease because the amount has become very substantial. We are a retailer and all of our leases are classified as operating. The legal expenses were incurred in 2010 and we want to be able to match revenue and expenses. Obviously we do not have any revenues right now.
As we approached our 2010 year end audit, would we be able to capitalize these costs based on the expectations that we will win the case? Is this considered goodwill and therefore may not be capitalized because it is internally created? Or can these costs be considered costs to acquire an asset and be capitalized?
Thanks in advance.