[jjm1181]

My company has been working randomly on a large project over the course of 10 years. They booked their hours and expenses to COGS sold, but never acknowledged the work as WIP or unbilled revenue at the end of each year. They are now wanting to recognize that work as an asset and want to put it as an asset on the balance. Easy enough right :). The only issue is that it’s a $1m project and a debit to COGS would throw the income statement for 2013 off the charts due to the small size of the company.

Any recommendations on how to proceed? It’s a legitimate transaction, but 10 years worth of expenses taken off the income statement and thrown onto the Balance sheet as an asset in one month will look pretty funny to reader’s of the financials.

Or is it a situation of “it is what it is”?

Thanks in advance!

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A 75
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F 85

[jjm1181]

A guess a second part of the question would also be….

Do I move the only cost of the employee out of the COGS for 2013 and the add on the difference of billing/interest to WIP?

I don't have access to the codification so not sure where else to turn to for general advice before I consult our outside CPA firm.

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[mla1169]

Chances are they'd have to go back and restate prior financial reports since this constitutes a change in accounting principle.

If you use an external auditor I'd run it by them before making such a change.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Anonymous]

Retained earnings…cough…ow. I'd have a long talk with the CPA for the company. I don't see how you can hit this year COGS for anything prior to this year.

[jjm1181]

I agree with your assessments. The question is then would we go back to each year applicable (2001 – 2009) and restate all of those financials though? Or just go back the last three years and split the difference? Is there another way to work the transaction? I assume not since all of the work was billed to the contract as direct labor in COGS.

B 79
A 75
R 78
F 85

[Author]

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