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Anonymous Self-employed

Can outside product testing fee for a new tangible product be capitalized?

Asked on July 29, 2013

My company's new CFO would like me to go back capitalizing all the new product testing fee done by Underwriters Laboratories for this year. We sell LED light fixtures so all our products have to be UL certified and tested before the products can be sold.

I'm not aware of any GAAP rules that would allow such product testing expense be capitalized. I would welcome comments/feedback from the Proformative community.

Thank you.

Answers

Regis Quirin Director of Finance • September 27, 2012

Please look at SFAS 2. If the testing is associated with a pre-production product, then capitalizing makes sense. As this decision also has tax implications, you need to look at that factor also.

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