So yeah you can accurately measure the effect in the game. Hence it would be capitalized under the rules for capitalization.

I'll also note that expensing what is an asset significantly affects gameplay decisions in the game. In fact without HR training by expensing training if you did any training you'd always lose out to someone who did not.

1) Your ability to borrow money is the determining factor in the game since almost anything you do is guaranteed to bring you profit exceeding the cost of funds.

- Building 8+ factories at level 1 is superior to 4 factories + expensed training since you will be able to borrow a lot more due to the higher asset value and increased profit. This is counter-intuitive.

- In challenge 7 you can see that going with the farms and training was a strong opening, but that was because of the existence of the HR global training. If I had had to do the training over a several year period I would have been throwing away my money in the eyes of the bank and with no profit and no increased asset I would have been unable to get a loan despite the fact that in the end I'd have spent less money getting my level 9 farms and my company would be in a great position due to those assets. You can actually see this in challenge 6 as you and I did the same livestock opening, but you used HR training and I didn't know about it.

The reason training is not an asset is that it fails the control test.

As you mentioned the entity must control the asset.
Unfortunately with the abolition of slavery, staff/workers cannot be classified as an asset. Hence, payment to workers is always regarded as an expense (Wages or Salary).
Training for staff at the same time is always regarded as an expense too for the same reason.
Atleast in the real world.

Now for this game, I do see your point. If we imagine that part of the training expense is also improved equipment (especially for farms) then that would be an asset. However the amount of the training/equipment that would actually become an asset would be very limited an would only be for the latest upgrade. It would not accumulate all the previous upgrades, so the majority of the the training would still be expensed

All-in-all, this would be a very difficult thing to accurately measure the future effect.

I think it can be classified as an asset in the game because 'training' can mean two things. 1 New equipment which increases productivity and that is more expensive of course, and here if its new equipment it can be classified as an asset with a cost of depreciation over time. 2 It can mean people more trained but in this case it goes to intangible assets/goodwill category which is the R&D.Training is an asset in this game.My opinion

Yep IAS would call for capitalization in this case:

An asset is a resource:

controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity.

Now if a level 9 farm was sometimes only as good as a level 1 farm then you can make the case that there is not certainty of future economic benefit.

And of course don't forget this is not just 'training'. A level 9 farm or factory doesn't have 5x the product from worker training. Significant capital improvements are implied which of course have no uncertainty in the sense of expensing vs capitalizing. Again sell me your level 9 farm at the same price as a level 1 farm and tell me you don't capitalize 'training' costs. The increase in value must be represented on the balance sheet.

All you have to ask yourself is a level 9 farm better than a level 1 farm. In real life you can't measure it so in general training is allowed to be classified as an expense. If however in the US you can measure the future effect of the training you must capitalize it according to the IRS. I'm pretty sure all accounting systems include this stipulation.

As I already noted it is stupid for an AI to sell a level 9 factory at cost when he has 25 million invested into it. That already passes the 'sniff test' in accounting for whether it needs to be capitalized.

Grashopa wrote: 1) Training is an asset - this needs to be fixed.

Hi Grashopa

I work as an accountant and can guarentee to you that training is never and has never been an 'asset'

It does not fit the definition of an asset according to the international accounting standards

Profit occurs on the income statement, I am massively profitable already - I could borrow another 1 billion using a standard interest cover ratio to determine my borrowing capacity.

The problem is on the balance sheet. You can't 'treat' training as an expense because it is not. It generates an asset. This bug also causes the AI to sell their firms for much lower than they are worth because the 25 million they spent on training isn't included in the value.

So your borrowing capacity is based on your balance sheet. It is not however the other banking standard which is debt to equity. I know this because simply borrowing cash and not spending it was exponentially increasing my monthly borrowing capacity. A debt to equity ratio is basically a profitability ratio because you increase your borrowing capacity through your net income flowing to shareholders equity.

So:

1) Training is an asset - this needs to be fixed.

2) The borrowing capacity function needs to be looked at.

3) I'd like to know how the borrowing capacity which would give me an idea of when I'll be able to borrow again so I can continue challenge 7.

Grashopa wrote:What happened was I stopped expanding and for a year and a half I simply borrowed the max every month until I had borrowed 500 million then I spent about 500 million of that on HR training to get all my farms from level 1 to level 9. I suspect because I didn't buy an actual asset I somehow am unable to borrow any more money now. I fast forwarded and still was unable to borrow almost a year after doing the 500 million on training.

Since training is treated as an expense, thus for that year, your firm has been operating in negative cash flow and an annual loss in general (360 profit -500). Credit will be extended once your firm demonstrates profitability again.

Since cash is an asset and training is not it appears there is an asset test for loans that probably should work differently in regards to cash and/or profit and training should either way be counted as an asset increasing the value of your firms by the amount invested.

https://dl.dropbox.com/u/68321241/noloans.zip

I think I have about 700 million in debt? 6 million a month at 9%. I am not able to borrow any more money currently despite having 700 million in revenue and 360 million in profit annualized. What happened was I stopped expanding and for a year and a half I simply borrowed the max every month until I had borrowed 500 million then I spent about 500 million of that on HR training to get all my farms from level 1 to level 9. I suspect because I didn't buy an actual asset I somehow am unable to borrow any more money now. I fast forwarded and still was unable to borrow almost a year after doing the 500 million on training.

Also the speed with which I was able to borrow the 500 million may be a bug? I stopped expanding around July of 1991 and was at that time able to borrow 26 million a month. By not spending the money and accumulating cash I was able to borrow about 10 million more every month until I was borrowing 100 million a month with 500 million in cash and only 240m revenues 80-90 million profits.

I can provide a save from before I spent the money on training if you'd like to look at the 100m+ borrowing per month.