![]() It is also not appropriate for long term assets as the concept does not allow for upward revaluation of these assets, and they will never show actual market value in the long term. The principle is not justifiable for financial assets where the value has to be adjusted to the market value at the end of each year. The cost principle is mostly appropriate for short term assets as the business unit does not keep them for too long, and their value doesn’t change that swiftly before they are sold. Budget and expenditure information recorded in the accounting system serves the basis for: (a) the preparation of yearly financial statements for the University (b) departmental-level planning and reporting (c) project/account specific planning and reporting (d) Facilities and Administration Cost proposal preparation and rate calculation and (e) audit reviews and many other uses.Start Your Free Investment Banking Courseĭownload Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others Once a determination of allowability, allocability, and reasonableness has been made, it is important that all expenses (those charged to sponsored research accounts and department GL accounts) be charged to the appropriate expenditure type/natural class. ![]() The cost must be able to withstand public scrutiny, i.e., objective individuals not affiliated with the institution would agree that a cost is appropriate on a sponsored research award or as a component in its Facilities and Administration Cost proposal. The process may entail assigning a cost(s) directly to a final cost objective or through one or more intermediate cost objectives. ![]() A cost objective may be a major function of the institution, a particular service or project, a sponsored agreement, or Facilities and Administration Cost activity. It also means the process of assigning a cost, or a group of costs, to one or more cost objectives, in reasonable and realistic proportion to the benefit provided or other equitable relationship. That is, the cost has been incurred solely to support or advance the work of a specific sponsored research award. Once allowability criteria have been met, the cost must be evaluated against the criterion of allocability.
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