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Capitalising Costs to save future costs?

Is it possible to capitalise costs which will result in cost savings over a number of years?

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Is it possible to capitalise costs which will result in cost savings over a number of years and then to amortise those costs over the life of the costs savings? How do the accounting standards view this type of arrangement? How do the tax authorities view this? Is this treated as some kind of Financial Instrument and, if it is possible, how should the 'assets' be valued at the outset and in furture years?

Regards,

Phil

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Hallerud at Easter
By DJKL
29th Jun 2017 16:45

What are the costs?

Do they create an asset? ( e.g.saving money next year the year after by say making people redundant this year is not an asset)

The accounting standards have lots to say about recognition of expenditure and what are assets.

You possibly need to be a tad more specific.

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Replying to DJKL:
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By philevans2003
29th Jun 2017 16:52

The costs are primarily a lump sum of professional fees from advisors, legals, etc. in order to merge a number of pensions schemes, resulting in substantially lower costs of administering the schemes during the remaining life of the scheme, i.e. 20+ years.

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Replying to philevans2003:
Hallerud at Easter
By DJKL
29th Jun 2017 17:45

If it is pension admin costs I would insert "hopefully" before "resulting".

If say fees etc re raising finance then I can see, given a fixed term, reason to release these over the loan term, struggling slightly to make same argument here.

One other thing, if say defined benefit schemes then would actuarial calculations re required future contributions not take the lower running costs into account.

Years since I worked on audits of large pension schemes (1987 was the last time) so I am probably the least qualified person on here re interpretation of what is possible, my gut says no, future benefit not certain enough.

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Replying to DJKL:
By Ruddles
29th Jun 2017 16:52

Quote:
You possibly need to be a tad more specific.

"Possibly"?

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By WhichTyler
29th Jun 2017 20:34

I don't think you have an asset here. You could ask your auditors to be sure...

You might note it as an exceptional item

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