When a firm knows of a large expense , can it delay recognizing the expense until a future period ?

Question

If so, for how long?

What are the time restrictions around gains and loses?

Answer 1

Depends. If you're on the cash accounting method, you account for it when you pay it. If on the accrual method, when the liability for the expense is incurred.

This isn't optional. You must claim the expense as noted above. Ditto for income.

Answer 2

If you are on the accrual method of accounting, you should be recording the liability and expense if the amount wasn't paid in cash. Paid in cash? It is an expense, hands down.

Also, if you accrue the expense but aren't going to realize it (I believe it is referred to as economic performance), then the expense isn't deductible for tax purposes in the current year.

Time restrictions on gains and losses? When you sell or have another triggering event occur, that is when the gain/loss is established. For a like-kind exchange you would defer gains and losses for tax purposes...