Capitalized or Deferred Revenue Expenditure

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Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 06, 2023

Definition

Heavy expenditure of a revenue nature, the benefit of which is available for a period of two or three (or even more) years, is known as capitalized or deferred revenue expenditure.

Explanation

This expenditure is not written off from the profits of the year in which it was incurred; instead, it is spread over the number of years for which the benefit is expected to last.

To maintain steady growth, it is advisable to spread this expenditure equally over the number of years for which it is anticipated that the benefit will be enjoyed by the business.

Examples

Examples of capitalized or deferred revenue expenditure include:

  • Exceptional repairs of a non-recurring nature by way of overhauling of the plant and machinery
  • Advertising payments made under a contract extending over a period of more than one year
  • Large amount allocated to advertisements in one year to popularize a new product

Capitalized or Deferred Revenue Expenditure FAQs

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About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.