Asset Recognition and Economic Attributes--the Relevant Costing Approach.

Abstract Some of the most controversial areas in accounting, direct costing, selection of inventory valuation methods, lower of cost or market, capitalization of research and other non-manufacturing costs-revolve around a central problem that permeates theory and practice. It is the asset versus expense problem that must be resolved on a most fundamental level before hoping to find answers to specific accounting controversies. In this article the problem is defined and the assumptions, that have been made by accountants in dealing with this problem are examined. Further assumptions are compared and evaluated in detail. The controversial issues in accounting have led one to quest for a workable assumption about asset valuation that will bring convincing and universally applicable answers to the problem of asset expiration. One believe that the relevant costing approach is more likely to result in a valid application to accounting practice of the basic accounting concepts. Conventional accounting rules are too often preoccupied with physical form instead of economic substance. The implementation of relevant costing which often result in expensing certain costs that are conventionally capitalized and capitalizing certain costs that are conventionally expensed.