Describe the effect of these two accounting treatments
The 2008 annual report of Cisco Systems discloses that the company expenses all advertising and research and development costs, while capitalizing all software development costs.
REQUIRED:
Describe the effect of these two accounting treatments on the financial statements, discuss these treatments in terms of the nature of these particular costs and the matching principle, and comment on management incentives that might influence Cisco Systems to favor one or the other accounting treatment.
