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What do you think about the statement

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Question: Company A reports under IFRS and capitalises certain development costs as mandated by IFRS. The company is in steady state and the amount invested in development is roughly the same every year. In the manager's opinion:

Capitalising development costs is hurting us. Although our net income is unaffected by this accounting policy, our assets are higher. Investors assessing the company may wrongly conclude that we do not utilise our assets very efficiently since our asset turnover (= revenue/assets) is affected by capitalisation."

What do you think about this statement? Is the manager right? Explain your answer.

Reference no: EM132741121

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