1. On January 1, 2003, the Statement of Financial Position for CPC showed the National Training Center at its cost to the firm, or $19.5 million. The investment that we had made by purchasing Sandown College and renovating our two buildings there was fully disclosed to our partners, all of whom took great pride in our decision to create the Center. Now, with a year’s operations behind us it seems to me that we have created some valuable human capital and that our balance sheet should reflect the added value of the firm because of the training programs we have conducted at the Center. I realize that if we were a firm subject to generally accepted accounting principles this would be difficult or impossible because our auditors would probably object, but CPC is a partnership and is privately owned by the partners only. For this reason, application of the accounting principles of accrual, matching, and realization all seem to me to support the idea that some or all of the training costs that we incurred in 2003 should be capitalized this year so that these potential expenses can be matched with the additional revenues we hope our trained professional staff will generate. Go you agree? Why, or why not?
I have to start by taking concern with your statement that we are not subject to generally accepted accounting principles. Generally accepted accounting principles is a framework for a set of guidelines that accountants follow in preparing statements of financial position for all companies. Our firm may be organized as a partnership but still produces a set of financial statements for our own internal use as well as outside use by institutions such as banks in order to borrow money and meet loan covenants. You are referring to the fact that our financial statements are not being used by the public in order to make investment decisions since we are a partnership that is wholly owned by a limited number of partners.
In regards to capitalization of costs incurred...