Which statement is true about a company's choice of capitalization policy?
A)All assets with a useful life of more than one year must be capitalized.
B)The company's policy must meet the minimum capitalization amounts established by GAAP.
C)The company's policy is usually determined relative to materiality.
D)The company may elect to capitalize operating expenses which exceed the minimum threshold for asset capitalization.

Question

Quizplus · Accepted Answer

A company's choice of capitalization policy is usually determined relative to materiality, meaning that the policy should capitalize only those costs that are material in relation to the company's overall financial position. This determination is subjective and depends on the company's industry, size, and financial condition. Choices A, B, and D are not accurate statements about a company's capitalization policy.

Which Statement Is True About a Company's Choice of Capitalization