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