Impact of Capitalising vs. Expensing for Ongoing Purchases

Hi guys,

I’m looking in the 2014 CFAI material on p.56 of FRA. In example 2, question 1 it says that the profit enhancing effects of capitalizing vs expensing will end in year 3, however wouldn’t expensing the computer lead to a total expense of $500 for the period rather than the $300 when you capitalize it? This seems to be a profit enhancing effect. Is it because you can’t simply switch between capitalizing and expensing the same item?

Right, the question is posed under the assumption the same accounting treatment is consistently used.