Background Note | HBS Case Collection | August 2000 (Revised February 2001)

Expense Recognition

by Paul M. Healy and Preeti Choudhary

Abstract

Recording expenses is not often clear-cut and can require considerable management judgment. This case discusses expense recognition in straightforward situations and then considers expense transactions that may be more complex to record. It uses examples that include situations in which: 1) The value of resources consumed is difficult to define; 2) Resources provide benefits for multiple years; 3) Resources are consumed, but the timing and amount of future payments is uncertain; and 4) Unused resources have declined in value.

Keywords: Accounting; Cost; Financial Statements;

Citation:

Healy, Paul M., and Preeti Choudhary. "Expense Recognition." Harvard Business School Background Note 101-015, August 2000. (Revised February 2001.)