If a cost cannot be linked to revenues or to an accounting period, how is the expense recorded?

When a cost cannot be directly linked to revenues or an accounting period, it is recorded immediately as an expense. This approach reflects the principle of matching costs with the revenues they help generate, but if no clear linkage exists, the cost is recognized in the period incurred. This prevents the misleading portrayal of financial statements, which could occur if expenses were deferred indefinitely or capitalized without justification.

Immediate recognition of the expense ensures that the financial statements reflect the actual economic activities of the entity during the reporting period. It helps maintain accuracy and transparency, ensuring that stakeholders have a clear view of the organization's financial health without the potential distortion that could arise from delaying the recognition of expenses.

In contrast, deferring or capitalizing costs would imply a future economic benefit tied to revenue generation, which is not applicable in this scenario, as the costs do not meet the criteria for linkage. Amortization over time applies only to specific types of costs, typically those that provide benefits over multiple periods, further emphasizing why immediate recognition is appropriate here.