Calendarization definition
/What is Calendarization?
Calendarization involves spreading the recognition of a transaction over more than one reporting period. This is usually done on a consistent basis over time. However, if the consumption of an expenditure is uneven over time, then the associated calendarization can be designed to charge it to expense in differing amounts per month to match the consumption level, such as half of the total amount in the first month and one quarter in each of the following two months.
Calendarization in Budgets
Calendarization is commonly used in the formulation of a budget, where revenues and expenses are spread across the full range of periods used within a budget. It is quite possible that actual revenues and expenses will vary from the monthly allotments, but the expectation is that the actual experience of the firm over the full period of the budget will approximately match the budget.
Example of Calendarization
For example, a company pays for a year of property insurance in advance, costing $60,000. The firm elects to calendarize the transaction by initially recording the payment as a prepaid expense and then spreading the expense recognition for the payment over the entire year, at a rate of $5,000 per month.