Question

In US GAAP, for interim reporting purposes, what are the two classifications of "costs and expenses"? How is each classification accounted for? What does IFRS say about the recognition of expenses for interim reporting purposes?

Answer 1

The two classifications of costs and expenses in US GAAP for interim reporting are operating expenses and non-operating expenses. IFRS allows for recognition of expenses on a systematic basis over multiple interim periods.

Step-by-step explanation:

In US GAAP, for interim reporting purposes, costs and expenses are classified into two categories: operating expenses and non-operating expenses. Operating expenses include costs directly related to the normal operating activities of the company, such as salaries, advertising, and utilities. Non-operating expenses, on the other hand, represent costs that are not directly tied to the company's main operations, such as interest expenses and losses from the sale of assets.

In US GAAP, both operating and non-operating expenses are recognized in the period in which they are incurred, regardless of whether they are incurred during interim or annual reporting periods.

Under IFRS, expenses are recognized in the interim period in which they are incurred. However, for certain items, IFRS allows for their recognition on a systematic basis over the interim reporting periods. This means that some expenses may be spread out and recognized over multiple interim periods.