The types of costs capitalized during the application development phase include employee compensation, as well as consulting fees for third-party developers working on these projects. Expenses related to the preliminary phase of the project and post-implementation activities are counted as expenses to the extent that they are incurred. For example, a farmer could buy 12 to 13 months of feed in November because he could get a good price, or a company could pay insurance premiums in advance for a year. For example, if you pay a commission to a broker to guarantee a long-term asset, the commission you pay to that broker becomes part of the asset; you capitalize that expense, rather than spending it in the current year.
This content is for general information purposes only and should not be used as a substitute for consultation with professional advisers. In this case, the exception occurs again if you have a recurring commission agreement with that broker and the commission cannot be assigned to specific assets; a recurring, non-allocable commission would generally be dispensable if the company purchases new assets on an ongoing basis and no part of the commission depends on the acquisition of specific assets.
