When running a small business is it better to capitalize some if not most of the costs and incur amortization expenses year over year or expense them all in the period they are incurred realizing the whole costs

CaptainForest

Capitalize or Expense?

The age old question. Well, that and which came first, the chicken or the egg?

Sometimes there is a black and white answer. The answer is either Capitalize or Expense. It is a clear answer.

However, most of the time, it is a grey area. Good arguments can be made for either.

It will depend on many circumstances.

For example, R & D (research and development). Capitalize or Expense? If the project (eg drug) pans out, capitalize it, but if it fails, then expense. But, you do not know, so you will have to made some educated decisions based on information.

There is also tax planning to consider, income statement presentation, etc.