Question

In week 5, Allison included the full cost of furniture, fixtures as an expense in the income statement. What standard will you use to go about this?

a) IFRS only
b) ASPE only
c) International Financial Reporting Standards (IFRS)
d) Both IFRS and ASPE

Answer 1

The correct accounting standard for including the cost of furniture and fixtures in the income statement, under both IFRS and ASPE, is to capitalize the cost and then depreciate or amortize it over its useful life, rather than expensing it all at once. The correct option is d.

Step-by-step explanation:

When Allison included the full cost of furniture and fixtures as an expense in the income statement in week 5, the applicable accounting standard to assess whether this treatment is correct depends on the reporting framework that the entity follows.

If the entity adheres to the International Financial Reporting Standards (IFRS), it should recognize the cost of furniture and fixtures as an asset and then depreciate it over its useful life, rather than expensing it all at once.

Likewise, under the Accounting Standards for Private Enterprises (ASPE) in Canada, the cost should be capitalized and amortized. Therefore, the correct answer would be d) Both IFRS and ASPE.

Both frameworks require that these types of expenditures be capitalized and expensed over time through depreciation or amortization. The correct option is d.