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Cash flow

Suresh Pai S (Tax Consultant) (1029 Points)

13 January 2017

What is the logic of classifying research and development expenses under operating activities?

What is the circumstance when interest is classified under operating activity?

What is the meaning of 'amortisation of premium on bonds payable'

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Ajit Hegde (CA - Final) (1367 Points)
Replied 13 January 2017

As per AS 26 r&d expenses cannot be capitalised. meaning, it is not considered as an ivestment since there is no certainity of income generation from such activity and hence debited to p&l as an expense. It is an operating expense for the business.

Interest charged to p&l and clasified as operating activity is generally interest on working capital which is taken for day to day operaring expenses.

Not sure on the last point. May be the reserve created is amortised over a period of time the bond is repayable

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