EXPENSES

Kelompok I
Pandu Ambar Annisa Asri
Athfi - Dias

Expense Defined

Framework paragraph
70 :
Expenses are decreases in
economic benefits during the
accounting period un the form of
outflows or depletions of assets or
incurrences of liabilities that result
in decreases in equity, other than
those relating to distributions to
equity participants.

IASB/AASB VS FASB
Expenses and Losses
Henderson, Peirson, and
Brown
The FASB distinction between expenses and losses does not seem to be very
useful. It requires a judgment about whether a transaction is part of the
entitys on going major or central operation. Not having to distinguish
between expenses and losses has distinct advantages . . . Management will
no longer be able to decide that an outflow of assets is a loss and omit it from
the determination of operating profit.

Change in assets and

Liabilities

Expenses and Cost

Expense
Recognition

Kriteria
pengakuan

Kaidah pengakuan

COST VS
EXPENSE

Matching concept
Revenue recognition VS
Expense recognition
Tidak terjadi dalam
periode yang sama
Pembukuan di akhir
tahun

EXPENSE MEASUREMENT
A number of decisions need to be made as how to
how expenses should be allocated across future
periods of resultant revenue
The decision criteria are meant to be supported by
the accrual accounting concept of matching
expenses agains revenues in the period they relate
IASB/AASB framework paragraph 95
Expense are recognised in the income statement
on the basis of direct association between the cost
incured and the earning of specific items of
income

Allocation Expense

ASSOCIATING CAUSE AND

EFFECT
Ideal way but difficult to prove
Based on what appears to be reasonable observation,
accountans decide that certain goods and services used
up must have helped in the creation of revenue for that
period
Revenue recognition principles there is no cost of sales if
there is no revenue
Long term construction contracts (comppleted contracts method
vs percentage of completion method)

Critics
Dificult to appy in practice
Certain amount of revenue can be attributable to certain amount
of expense

Systematic and rational

allocation
The aim is to recognise expenses in the
accounting periods in which the economic
benefit associated with these items are
consumed or expire (framework,para.96)
The matching process begins by associating
expense to segments of time.
Example: depereciation expense
IAS 16/aasb 116 property, plant and equipment
defines depreciation as the systematic
allocation of the depreciable amount of an asset
over its useful life (par 6)

Systematic and rational allocation

The depreciation method used must reflect the
pattern in which an assets future economic
benefits are expected to be consumed ( par 60)
Economists : depreciation as a decline in the
value of an asset
Accountans see long term non-current assets as
bundles of future services that become smaller
and smaller because of:
Physical factors
Economic factors

Immediate recognation
If there is no strong reasons to use causeeffect method and systematic and rational
allocation method, cost can recognised
immediately as an expense
Contoh: advertising expense, research
expenditure
IAS 38/aasb 138 hold the view that reserach
expenditure does not meet the recognation
criteria for an asset, that is, future economic
benefit are not probable, or cannot be
measured reliably

Lesser Requirement for Objective Evidence

Acceptable practice is reasonable and
appropriate, not for objective evidence.
Alasan lebih sedikit keharusan bagi bukti
objektif dalam mengakui expense
dibandingkan dengan revenue adalah
konvensi konservatisme.
Mencatat expenses, losses, dan liabilities
sesegera mungkin, meskipun buktinya
lemah.
Konservatisme mendasari probability dan
reliability dalam Framework.

 The interpretation of matching concept in

practice is biased by the effect of the
convention of conservatism.
Konservatisme tidak berfokus pada bukti
tetapi ketakutan akan overstatement
pada net asset dan profit.
Selain probable dan reliable, standar
mensyaratkan entitas untuk memiliki
present obligation (legal/constructive)
sebelum mengakui provisi.

Evaluation of Each Matching Method

The Allocation Problem

Thomas argues that allocations are unjustified. To be
justified, three criteria are suggested:
Accountants defend allocations on

two grounds.
1. A given input provides services

in the current and future periods

and the cost allocation pattern
reflects the cost of the services
in the given periods.
2. Allocated data serve a useful

purpose because readers of

accounting report find them
useful

The Allocation Problem

Thomas insists that accountants must show that
the services provided by the given input
contributed towards a certain amount of cash
inflow or revenue or cost savings.
He contends that the pattern of services or
contributions does not exist in the external world.
Whenever inputs interact, calculation of how
much revenue or cash inflow has been
contributed by each input are meaningless.
People have been conditioned to believe that
allocated nformation is valid.

Defence of Allocations
Eckel

Defence of Allocations
Zimmerman

Sekian
Terima
kasih