Happy Easter everyone!
After really struggling with my KCQs for chapter 4, I was egg-cited to find that chapter 6 was much easier to understand.
I have attached my draft below – please feel free to comment with any feedback!
Cheers
Emma
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Accrual Intentions 
Emma – great draft ASS#2 Step 2 … I thought there would be a lot less chocolate in your Step 2 after the strong emphasis on chocolate in your Step 1 … but when I started reading about you allocating the cost of Easter eggs between your two children I knew that wasn’t to be the case.
Your draft ASS#2 Step 2 is in a number of respects one of the best I have read over the years. You have a very clear grasp on a number of the key concepts … and in particular that we only recognise costs that we allocate to products or services when those product or services are sold, which can be some time after we have incurred those costs. In the meantime those costs sit in our inventories (i.e. as assets).
And, would you believe, there are judgements about which costs we might decide to allocate to products (product costs) and which we might expense as they are incurred in the year (period costs). Why might how we make these judgements between whether we decide to treat an expense as a product cost or period cost be important?
Martin
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Thanks Martin, I appreciate your encouraging feedback! 🙂
Regarding why might how we make the judgements be important… my first thought is because of how it affects the tax return (but I say that only because that’s where I have experience, I’m sure there’s much more to it than that!) I’m guessing also it’s important because it helps managers make decisions such as the viability or profitability of a particular product? And because there should be consistency across companies as well? Let me know if I’m on the right track 🙂
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