Financial Accounting Blog

Friday, August 20, 2004

Capitalizing Costs. It's the age-old problem in accounting. You spend some money and you make a credit to cash--- but what do you debit, an expense or an asset account? The WSJ reported that some analysts are concerned that Helen of Troy is capitalizing costs in inventory (asset) that should have been expensed immediately.
"According to the paper some analysts said Helen of Troy's decision to put some costs together with inventory instead of treating them as quarterly general and administrative expenses% may have inflated earnings by more than 5 percent in its last fiscal year, more than 9 percent the year before% and nearly 16 percent in the year prior to that."