Content area
Full Text
Abstract
Period costs are extremely important for financial disclosure because they are running directly in the P&L account, having an immediately impact on income statement, and thus on financial performance.
In the management accounting, period costs are deducted from revenues without ever having been included as part of inventory, whereas in the financial accounting they are assigned to the accounting period.
In this paper we posit that employees benefits (IAS19) represent period costs, highlighting the main difference in treatment of fringe benefits on the short term and on the long run, where accrual approach intervenes. (IAS37).
Keywords: period costs, treatment in month end closing, accrual accounting method, fringe benefits
JEL classification: J31, J32, J33
1. Introduction
In this study we analyse the impact of period costs on financial statements. As costs are running directly into the profit and loss account (P&L), they have an immediately impact on the finacial result and thus on financial performance.
In relation to German accrual principle the author highlights the main difference in period costs treatment in Romania and Germany: the acruall approach of fringe benefits.
At the end is presented the impact of employee benefits' period costs on the trial balance, P&L, Balance sheet and Cash flow in month end closing and thus on the financial statements of the reporting period.
2. Period Cost Delimitation
In the financial accounting period costs relate to the accounting period (year, month) because of the independence principle according to Collier. (2003, p. 178) That means that only events occurred in given period should be posted in the corresponding accounting period. (Todea, 2001, p.16). Period belonging cost should
In managerial accounting, the most comprehensive period cost delimitation belongs to Horngren, Datar and Foster (2012, p.38-42): period costs are all costs in the income statement other than cost of goods sold. They are deducted from revenues without ever having been included as part of inventory. They are all nonmanufacturing costs, typically called selling, general, and administrative expenses in the income statement. Thus most of the administrative costs of a business can be considered period expenses.
Ebbeken, Possler and Ristea (2000, p.19) declares that period costs are respective period related expenses that have nothing in common with inventories. Regarding period costs is of paramount importance...