incur

Examples of incur in the following topics:

• Cost of Interest During Construction

  • The amount of interest cost incurred and/or paid during an asset's construction phase is part of an asset's cost on the balance sheet.
  • The amount of cash borrowed will incur interest expense to the borrower; the interest paid by the borrower serves as interest income to the lender.
  • The cost of interest incurred and/or paid is included as part of the historical cost of the asset under construction.
  • If any delays occur during the construction phase, the interest costs incurred during the delay are not capitalized.
  • When the asset's construction is complete and the asset is ready for use, any additional interest expense incurred is no longer capitalized as part of the asset's cost.

• Current Guidelines for Expense Recognition

  • For an expense to be recognized under the matching principle, it must be both incurred and offset against recognized revenues.
  • For an expense to be recognized, the obligation must be both incurred and offset against recognized revenues.
  • An expense is incurred when the underlying good is delivered or service is performed.
  • Under the matching principle, the expense related to the raw material is not incurred until delivery.
  • Generally, an expense being incurred is insufficient for it to be recognized.

• Capital Expenditures

  • Capital costs are incurred for the purchase of land, buildings, construction of assets, and equipment, etc., used during business operations.
  • Capital expenditures ("CAPEX") are one-time expenses incurred for the purchase of land, buildings, construction of buildings and other assets, and equipment used in the production of goods or in the rendering of services.
  • CAPEX are not limited to the initial construction of a building or other asset and should include other expense items, such as interest incurred during the construction phase.
  • A CAPEX cannot be deducted as an expense in the year in which it is paid or incurred and must be capitalized.
  • Costs that are expensed in a particular month simply appear on the financial statement as a cost incurred that month.

• Positive Externalities

  • Positive externalities are benefits caused by activities that affect an otherwise uninvolved party who did not choose to incur that benefit.
  • Positive externalities are benefits caused by transactions that affect an otherwise uninvolved party who did not choose to incur that benefit.
  • That person would be a free rider since he would benefit from inoculations without incurring any cost.

• Sunk Costs

  • Sunk costs are retrospective costs that cannot be recovered, and are therefore irrelevant to future investment decisions in the project which incurs them.
  • Sunk costs are retrospective costs that have already been incurred and cannot be recovered.
  • Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken .

• The Importance of Timing: Revenue and Expense Recognition

  • Revenue is recognized when earned and payment is assured; expenses are recognized when incurred and the revenue associated with the expense is recognized.
  • Accounting standards require that companies using the accrual basis of accounting and match all expenses with their related revenues for the period, so that the income statement shows the revenues earned and expenses incurred in the correct accounting period.
  • The matching principle, part of the accrual accounting method, requires that expenses be recognized when obligations are (1) incurred (usually when goods are transferred, such as when they are sold or services rendered) and (2) the revenues that were generated from those expenses (based on cause and effect) are recognized.
  • While the costs associated with the wood were incurred and paid for during January, the expense would not be recognized until February 15th when the soldiers that the wood was used for were sold.

• Types of Ownership

  • The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company unless they have signed a personal guarantee.
  • The owners and managers are only liable for the business up to the amount they have invested in the company, and are not liable for the debts incurred by the company (unless they have signed a personal guarantee, which usually is not the case for a large corporation).
  • A situation in which owners of a business are liable for all the debts that the business may incur.
  • The owner of the business has total and unlimited personal liability of the debts incurred by the business.
  • Each partner has total and unlimited personal liability of the debts incurred by the partnership.

• Reporting Intangibles

  • The cost of created intangibles is generally expensed as incurred.
  • Therefore, even though a company may incur substantial research and development costs to create an intangible, these costs are expensed.
  • Some argue that the costs incurred internally to create intangibles bear no relationship to their real value.
  • And others argue that due to the underlying subjectivity related to intangibles, a conservative approach should be followed—that is, expense as incurred.
  • The costs of acquiring and defending a copyright may be capitalized, but the research and development costs involved must be expensed as incurred.

• Accounting for R&D Activity

  • Research and development costs are the costs incurred in a planned search for new knowledge and in translating such knowledge into new products or processes.
  • Due to the difficulty of determining the costs applicable to future benefits, many companies expensed all such costs as incurred.
  • Other companies capitalized those costs that related to proven products and expensed the rest as incurred.
  • As a result of these varied accounting practices, in 1974 the Financial Accounting Standards Board in Statement No. 2 ruled that firms must expense all research and development costs when incurred, unless they were directly reimbursable by government agencies and others.

• Loss Contingencies

  • A loss contingency may be incurred by the entity based on the outcome of a future event, such as litigation.
  • A loss contingency is incurred by the entity based on the outcome of a future event, such as litigation.
  • At least a minimum amount of the loss expected to be incurred is accrued.