To record current expenses as a long-term asset in order to delay the recognition of expenses.
This allows companies to spread out the cost of new assets over a long time span and avoid immediate negative effects on revenues. Sometimes companies will capitalize regular business expenses in order to appear more profitable. This impression of artificially high cash flow is only sustainable until a company can no longer hide its expenses. This is revealed through depreciation costs. Depreciation costs are higher because the long-term assets account is larger. Since depreciation cost is shown as an expense on the income statement, record of the expenditure eventually makes it to the income statement, just in the form of depreciation costs, and later than it would have normally.
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