Good day to everyone! Please, help me in the next controversial question.
IAS 2 requires distribution expenses to be accounted as expenses of a period instead of to increase cost of goods. It is quite obvious, however, if, for instance, a company incurs transport expenses to deliver its products to customers situated in other regions or even in other countries. In this case, in my opinion it would be wrong to reflect this transport expenses as “distribution cost” of a period for the following reasons. Firstly, the moment of completion of a deal and corresponding revenue recognition can differ from the moment of transport expenses recognition. It leads to the breach of “Accrual method” and IAS 18. Second of all, the sum of such expenses enhances Income (revenue) of the seller and in the same time is not included in cost of good sold. Eventually, “swollen” trade margin confuses users of financial statements especially if the company has not made such kind of sales to other regions earlier.
What do you think about this issue?
Personally, I tend to capitalize such transport expenses and write off them only after the fact of a sale.