Investing Activities

Securities investments

Investments in stocks and bonds of other firms

Long-lived operating assets

Investments in tangible and intangible assets

Management judgment

Opportunity for earnings management in deciding whether to expense or capitalize costs

Capitalization

Recording long-term beneficial expenditures as assets on the balance sheet

Book value

Remaining value of an asset on the balance sheet

Expenditures for Improvements

Additional expenditures to add to or improve long-lived operating assets

Externally acquired R&D

Capitalization of purchased patents or licenses for R&D

Interest Incurred to Self-Constructed Assets

Capitalizing interest costs on debt used to finance asset construction

Technological feasibility

Completion of detailed program design or working model for software development

Accounting for Software Development Costs

Expense recognition for developing computer software until 'technological feasibility'

Repairs & maintenance expenditures

Expense recognition for maintaining the originally expected service potential

Depreciation

Expense recognition for the subsequent use of a long-term tangible asset

Investing activities

Firm's effective use of financing proceeds to generate returns

R&D Expenditure

Immediate expense recognition for internally incurred R&D costs

Immediate expense

Treating a cost as an expense with no asset creation