Capitalize
An accounting method used to delay the recognition of expenses by recording the expense as long-term assets.
In general, capitalizing expenses is beneficial as companies acquiring new assets with a long-term lifespan can spread out the cost over a specified period of time. Companies take expenses that they incur today and deduct them over the long term without an immediate negative affect against revenues. Investopedia Says:
If a company capitalizes regular operating expenses, it is doing so inappropriately, most likely to artificially boost its operating cash flow and look like a more profitable company. Because a company can't hide its expenses forever, such a practice will fail in the long run.
It is important not to confuse capitalize with capitalization. Related Terms:
Aggressive Accounting
Market Capitalization
Non-Operating Cash Flows
Operating Cash Flow - OCF
Operating Expense |