1. Livent transferred preproduction costs for shows to fixed asset accounts such as the construction of theatres . . . and inflated profits by fraudulently amortizing preproduction costs over a much longer period of time

(Accounting and Auditing Enforcement Release No. 1095, In the Matter of Livent, Inc.)

Required:-

What do you mean by amortizing capitalized costs? Discuss any three steps in detecting extended amortization policies. (5 marks)