Expenses
Definition of expenses
outflows rather than physical objects, thereby indicating a concept of value
Expenses and losses
The using up of assets must entail a cost to the entity for it to be considered an expense
Expenses- ongoing major or central operation
Losses- decrease in net assets
Behavioural view of expenses
- revenue as measuring accomplishment
- assigning expenses to be matched with timing of revenue
Matching
- probable the consumption or loss of future
- can be measured reliably
- probable means >50%
Alternative measurement
Method 3:
Immediate recognition
Method 1:
Cause and Effect
Method 2:
Allocation of Costs
Criticisms of Matching
Sprouse indicated that matching process has relegated the balance sheet to a 'sheet of balances'
Mr Wayne criticism- the inadequate emphasis that SAC 4 placed on the matching principle
SAC 4 was criticised on the grounds that it was inherently 'balance sheet biased' in that it placed a bias towards B/S rather than P/L
Lesser requirement for objective evidence
Evaluation of each matching principle
The allocation problem