Business Trip Costs Capitalisation in Australia

Subject: Finance
Pages: 1
Words: 254
Reading time:
< 1 min

The travel expenses of the director from Sydney to Armidale meet the criteria set by AASB for an expense to be capitalized. Moreover, according to International Accounting Standards, research and development costs can be capitalized if they add direct benefits to the value of the asset. The director’s trip to Armidale was very significant since it helped the technical team to solve a critical problem that was required to complete the project. The cost of the director should be capitalized because, without this help, the technical team could not have completed assembling the asset successfully. Although the aim of the director was not to travel to Armidale, his technical assistant qualifies to make the asset better in a period of more than one year.

The cost of the director also meets the criteria for adding a permanent value to the asset. After the director had traveled to Armidale, he offered the technical team a solution that led to the successful assembling of the asset, adding a permanent value. However, In most cases, costs that do not add value to the asset are written off in the period they are incurred. They include the cost of the material, salaries, equipment, and facilities. Shust noted that the total research and development cost is charged in the statement of financial performance in each period they are incurred. Under International Financial Standards, expenditures that extend beyond one year should be capitalized if they help an asset to be more efficient.