Correction
Matching does not create an asset. Before deferring a cost, identify the resource the entity controls and apply the recognition and measurement requirements for that transaction.
Suppose a company pays for a broad advertising campaign that management expects to support next year's sales. The forecast does not by itself establish a separate asset. The company must apply the relevant guidance to the expenditure and the rights obtained. A desire to avoid uneven profit is not evidence of a controlled resource.
Some costs are allocated across periods because a recognized asset is consumed during several periods. Depreciation is an example. Other expenses are recognized when an obligation or consumption occurs even when no single revenue amount can be matched to them.
Check your answer
Name the event, the resource or service received, the entity's rights, and the applicable requirements. If no recognized asset remains, do not invent one to move the expense into a preferred period.
When this mistake may appear
- A cost may support future revenue.
- Immediate expense recognition would make profit uneven.
Your work may contain this mistake if:
- Capitalizes a cost only to match a later revenue estimate.
- Names no controlled resource or applicable requirement.
- Treats smooth earnings as evidence of faithful reporting.