Deferring Expense to Next Fiscal Year?

  • Creator
    Topic
  • #2226666
    Dan
    Participant

    I’m looking for an opinion on the following scenario. It happened at where I work and I was curious about it.

    We paid recruitment fees for a new business executive that will start next fiscal year. I think the recruitment fees should be recognized in expense now. The reason is because the agency performed their part of the agreement (finding the candidate) and the school agreed to employ him. The agency invoiced us and we paid. My managers told us to defer the expense to prepaid and amortize beginning next fiscal year. I think it’s because this new person isn’t starting until next fiscal year and it’s arguably an expense for next year. I understand that “expenses follow the revenues” so it sounds like that’s why we are deferring the expense until next year.

    What are your thoughts?

    AUD - 83
    BEC - 91
    FAR - 85
    REG - 79
    .
Viewing 2 replies - 1 through 2 (of 2 total)
  • Author
    Replies
  • #2226693
    bhunt815
    Participant

    My opinion is that it is clearly a current expense and should not be amortized, unless there's some aspect of the contract where your company gets reimbursed if the new fella doesn't show up or doesn't stay for a certain period of time. In that case, it becomes a little gray since it's contingent on him actually working for you?

    AUD - 79
    BEC - 81
    FAR - 84
    REG - 78
    Becker Self Study supplemented with Ninja MCQ's for BEC and REG.

    Licensed CPA in Louisiana.

    FAR 04/11/2016 - 84
    AUD 05/12/2016 - 79
    BEC 07/06/2016 - 81
    REG 08/29/2016

    #2226753
    alloverit
    Participant

    Two things come to mind:

    1) Q: When are the benefits of the recruitment received?
    A: In my opinion it is the current period because that's when you LOCKED the executive in…but since he won't provide any tangible benefits until next period I can get behind the deferment I suppose.

    2) Q: What is industry practice? If there is a lot of commit/de-commit with this type of executive recruitment then it SHOULD be recognized when the exec starts work.

    Truthfully, it may not be a material issue anyway.

    FAR 81

    AUD 83

    BEC 93

    REG 84

    Ross

Viewing 2 replies - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.