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IFRS Classification in Income Statement

23 August 2010 1,504 views 2 Comments

If a project is directly related to the project i.e software maintenance & development. How do I tag it in the income statement. Is it alright to say ” project implementation cost’

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2 Comments »

  • patriciawalters said:

    I’m sorry. I’m not sure exactly what you are asking.

    Are you asking what a good title for an income statement line item would be?

    To help me understand better would you let me know whether you are planning to show income statement expenses by nature or by function?

    For example, software maintenance and development costs. Since you are talking about the income statement, my initial assumption is that these development costs are not eligible for capitalization. But there are lots of different costs that could fall under that title (employee costs, amortization or depreciation of computer hardware or software used in development).

    Can you be more specific so I understand your real question?

    Regards
    Patricia Walters

    # 23 August 2010 at 9:49 pm
  • Mladek said:

    Hi Patricia,

    I’m not surprised at your confusion. It takes a while to get used to how continental accountants think. Took me years.

    In general, the knee jerk reaction is to obfuscate, befuddle, dissemble and confuse. Though it’s not their fault. The ‘national GAAPs’ most of them grew up with go out of their way to provide information of little relevance to anyone (except the national revenue services).

    ‘Project implementation cost’ is a good example. It probably gave the author a great deal of work to find a title that sounds like it has meaning without actually possessing any. Taken at face value, it can can mean anything from a project to beautify the executive suite to making the company more green.

    I am also pretty sure the author is especially proud of him/herself for selecting the word ‘implementation’ since it connotes development, implies the creation of permanent value, even as its income statement placement clearly contradicts both.

    Though I am pretty sure the author is still a little sad that he/she could not use the term ‘services’, which would almost certainly be acceptable under “national GAAP”.

    But to answer the question.

    No ‘project implementation cost’ would not be a good title for costs related to software development and maintenance.

    Maybe you should try ‘software maintenance & development costs’. If you also included a footnote disclosure explaining why the development costs did not qualify for capitalization, that would probably be OK.

    # 24 August 2010 at 5:39 am

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