We previously either classified incurred labour costs for product support/development as either COS or capilised AUC.
Now we have entered into an outsource contract that takes 100 products and covers 200 FTEs away from the in-house model.
Then monthly costs covering the outsouce labour will again be treated as COS or capilised AUC depending on what the nature of the work the outsource company spends.
My question is around a $10m one time one off upfront payment that has to be paid when the 5 year contract is signed. The $10m is for $4m severence, $5m knowledge transfer and $1m merit increases. Should the $10m cost be treated as an operating expense and roll to admin expenses or should it be classified as COSs?
I have looked at the definations and you could argue it both ways.
Accounts prepared under IFRS.