Date: April 16, 2011
To: Busy Signals, Unlimited
From: Brooke Perryman, Jimmy Wall, Taylor Morris, and Barrett Watson
Subject: Deferral of Training Costs

Accounting Issue
Should Busy Signals, Unlimited (Busy) defer the costs of training to TSRs?

Alternative #1 –
Busy should not defer the costs of trainings its TSRs since such costs do not meet the definition of an asset.

Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as …show more content…
To be included in a particular set of financial statements, an item must not only qualify under the definition of an element but also must meet criteria for recognition and have a relevant attribute (or surrogate for it) that is capable of reasonably reliable measurement or estimate. Thus, some items that meet the definitions may have to be excluded from formal incorporation in financial statements because of recognition or measurement considerations (FASB.org Concept Statement 3, paragraph 17).

Because of this authoritative support, we believe that the training costs should not be treated as an asset and, therefore, expensed in the period.

Alternative #2 –

Busy should defer the costs of training its TSRs because the training costs qualify as an asset and the deferral results in an appropriate matching of revenues and costs.
Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks and patents. And cash itself is an asset. So are investments a company makes.

Due to this authoritative support, our team believes that the costs of training should be classified as an asset and