I have a manufacturing client that capitalizes ALL operating expenses into their inventory. I know that all variable and fixed manufacturing costs are supposed to be capitalized into inventory. But they take 2 steps further by also including all sales & marketing expenses and all G&A expenses in their inventory overhead capitalization calculations.
They have been doing this because they want to make sure they truly capture what their real profit margin is for all sales. That is fine for internal purposes, but I believe this is a GAAP departure for financial statement purposes.
Is it a GAAP departure?