Is the Current Accounting Treatment of Education and Training Costs Appropriate?

Abstract

This paper addresses the apparent disconnect between the economic consequences of firm‐sponsored education and training and the accounting and disclosure treatment of those costs. Research suggests that firm‐sponsored education and training enhances firm productivity and performance, yet accounting standards require firms to treat education and training costs as expenses. This study discusses not only the rationale for this accounting treatment, but also what firms and accounting standard setters can do to enhance the information provided to capital market participants about firm‐sponsored education and training.

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