Process: GL – Amortizing to Infinity
Are you really amortizing a prepaid expense of less than $100? What is that doing for you? Are you going to change a decision you made because of an additional $8.33 per month? Set a limit and just expense some theoretical prepaid expenses (like magazine subscriptions) at one time. Of course with larger items you will want to amortize them. Just do what you/management/owner are comfortable with. Maybe separate them into categories like maintenance contracts & extended warranties or whatever. You could put dollar floors on each category and just expense anything beneath the floor. Sort of like you do with your capital expenditures. But with the freedom to set whatever floor you want category by category. Sure the Matching Principal Police might ticket you for the offense, but the cash out is the same and you will save some time in the process. If the Matching Principal Police ticket you, just make a year-end adjustment to bring it back in line with GAAP or IAS. Remember that NO ONE should be running their organization with tax implications or GAAP/IFRS as their directives. Profit maximization and cash flow are it. If you have those two consistently, everything else is simple to deal with.