We are a startup large power generation company, and all our projects are in predevelopment phase, and we have multiple people working on different projects, hence my question is can I capitalize their wages & salaries since they are working on those specific projects, does GAAP allow us to do this?
USA Capitalization of Labor Cost
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DrStrangeLove
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Under US GAAP, ASC 730-10-05-3 would say no:
"Also, there is often a high degree of uncertainty about whether research and development expenditures will provide any future benefits. Thus, even an indirect cause and effect relationship can seldom be demonstrated. Because there is generally no direct or even indirect basis for relating costs to revenues, the principles of associating cause and effect and systematic and rational allocation cannot be applied to recognize research and development costs as expenses. That is, the notion of matching, when used to refer to the process of recognizing costs as expenses on any sort of cause and effect basis, cannot be applied to research and development costs. The general lack of discernible future benefits at the time the costs are incurred indicates that the immediate recognition principle of expense recognition should apply." (bolding mine)
And if you look in ASC 730-10-55-1(h)-(j), it sounds like "predevelopment activities" are R&D costs that would be expensed as incurred under ASC 730-10-05-3:
"The following activities typically would be considered research and development within the scope of this Topic (unless conducted for others under a contractual arrangement—see paragraph 730-10-15-4[a]):
Do those sound like the activities your projects are doing currently? Are your projects not yet at that point? Then you have to expense the labor costs instead of capitalizing them.
"Also, there is often a high degree of uncertainty about whether research and development expenditures will provide any future benefits. Thus, even an indirect cause and effect relationship can seldom be demonstrated. Because there is generally no direct or even indirect basis for relating costs to revenues, the principles of associating cause and effect and systematic and rational allocation cannot be applied to recognize research and development costs as expenses. That is, the notion of matching, when used to refer to the process of recognizing costs as expenses on any sort of cause and effect basis, cannot be applied to research and development costs. The general lack of discernible future benefits at the time the costs are incurred indicates that the immediate recognition principle of expense recognition should apply." (bolding mine)
And if you look in ASC 730-10-55-1(h)-(j), it sounds like "predevelopment activities" are R&D costs that would be expensed as incurred under ASC 730-10-05-3:
"The following activities typically would be considered research and development within the scope of this Topic (unless conducted for others under a contractual arrangement—see paragraph 730-10-15-4[a]):
h. Design, construction, and operation of a pilot plant that is not of a scale economically feasible to the entity for commercial production
i. Engineering activity required to advance the design of a product to the point that it meets specific functional and economic requirements and is ready for manufacture
j. Design and development of tools used to facilitate research and development or components of a product or process that are undergoing research and development activities.
Do those sound like the activities your projects are doing currently? Are your projects not yet at that point? Then you have to expense the labor costs instead of capitalizing them.
Yes you can capitalize their wages and salaries individually and cost per project also there is a software allow you mange your individual project cost and per project wages of multiple people also. Each entry credit the every person ledger and you will debit every ledger will payments also