The distinction between a capital expenditure and an immediate expense for a plant asset requires judgment.

Question

Quizplus · Accepted Answer

The distinction between a capital expenditure (an expense that benefits future periods and is recorded as an asset) and an immediate expense (an expense that benefits only the current period and is recorded as an expense) for a plant asset depends on a company's accounting policies and on the specific facts and circumstances of each transaction. Therefore, judgment is required to determine whether an expense should be capitalized or expensed immediately.

The Distinction Between a Capital Expenditure and an Immediate Expense