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COS or operating expense

COS or operating expense

Hi all,

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. 

Many thanks   

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By DJKL
19th Oct 2017 11:36

Is your navigation faulty, you have made landfall where the Pilgrim Fathers departed from?

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to DJKL
19th Oct 2017 11:54

eh?

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By DJKL
to qwertyqwerty05
19th Oct 2017 12:03

The dollars.

Edit:- and the famous misquote, or at least difficult to confirm quote,

"England and America are two countries separated by a common language"

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to DJKL
19th Oct 2017 12:11

oh .. you can use GBP as well :)

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By DJKL
to qwertyqwerty05
19th Oct 2017 12:25

I would if I understood the question, I suspect my shortcomings rather than the question's :)

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19th Oct 2017 16:10

qwertyqwerty05 wrote:

I have looked at the definations and you could argue it both ways.

If we are talking management accounts, decide which provides the most useful management information and do that. If it's the financial accounts, decide what you think's best, agree it with FD, explain approach to auditors.

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