Improper Capitalization of Costs
Gerard M. Zack CFE, CPA, CIA, CCEP · 2012
This chapter addresses the improper capitalization of costs as a method of perpetrating financial statement fraud. With these schemes, costs that should be reported as expenses of the period in which incurred are, instead, capitalized as an asset, thus inflating assets and underreporting expenses. Several categories of costs are susceptible to this treatment, including repairs and maintenance, research and development, internal development of intangible assets, and certain costs associated with websites and software.