CERTYNEX IFRS ACADEMY

Pellane opens a new regional branch. It incurs legal costs for setting up the branch and start-up costs for the branch's activity. The finance director proposes to capitalise them, because the branch will be profitable and the invoices allow the cost to be measured reliably. What should be concluded?

The costs are capitalised, because both recognition criteria are met.

The costs are expensed: start-up expenditure is among the items expensed, and the criteria are not enough without the definition.

The costs are capitalised and amortised over the branch's lease term.

The costs are capitalised only if the branch makes a profit in its first year.