In the food and beverage and hospitality industry, companies often need to create internal training materials to improve the efficiency of new employee onboarding. Recently, a company inquired: Can the series of expenses incurred by outsourcing to an external team to film new employee training videos all be treated as capital expenditures?

Composition of Expenses and Specific Circumstances

The relevant expenditures listed by the company include:

  • Filming service fees (paid to the external filming company);
  • Travel expenses (incurred by the company's own employees participating in the performance);
  • Prop and costume fees (the term "warbrode" in the original text is suspected to be a typo for "wardrobe", referring to clothing or styling expenses);
  • Other miscellaneous expenses.

Among the above expenditures, the travel expenses are primarily incurred by the company's own employees, who participate in the filming as actors.

Core Question: Is Capitalization Feasible?

The inquirer hopes to clarify: Can all of the above expenses be capitalized? The company operates in the food and beverage and hospitality services industry.

"Can we capitalize all of these expenses?" — the inquirer's original words.

Industry Background and Accounting Considerations

Under current accounting standards, capitalization generally requires that expenditures bring future economic benefits and that costs can be reliably measured. As intangible assets or long-term deferred expenses, training videos need to meet specific conditions for capitalization. However, different jurisdictions have varying treatments for expenditures such as internally used software and content development, and industry characteristics (such as hospitality) may affect the judgment.

It is worth noting that if travel expenses are incurred by employees personally due to their participation in filming, their nature may be closer to employee benefits or business entertainment rather than incremental costs directly attributable to asset costs. In addition, props and costumes, if reusable, may need to be evaluated separately for their useful lives.

Recommendations and Uncertainties

Due to the lack of specific accounting standards basis and the company's accounting policies, this article cannot provide a definitive conclusion. The company should consult professional accountants and analyze the capitalizability of each expenditure item by item, in conjunction with local regulatory requirements and internal policies. Particular attention should be paid to:

  • Whether filming fees constitute part of the asset cost;
  • Whether employee travel expenses are directly attributable costs;
  • Whether props, costumes, etc., meet the conditions for asset recognition.

The final treatment may vary depending on the company's choices (such as expensing or capitalizing) and audit requirements.