One of the ways companies can mislead investors is by inappropriately capitalizing costs.When is it appropriate to capitalize costs?

Question

Quizplus · Accepted Answer

Costs can be capitalized when future economic benefits are associated with the cost. Capitalized costs are not expensed immediately but are instead spread out and recognized over a period of time. This is appropriate because it reflects the fact that the benefits of the costs will be enjoyed by the company over a longer period of time. Examples of costs that can be capitalized include development costs, research costs, and certain costs associated with long-lived assets such as property, plant, and equipment.

One of the Ways Companies Can Mislead Investors Is by Inappropriately