Accounting Standards

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Sanjay (Querist)
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06 November 2008 I would like to know as to the basis on which a company decides on whether to capitalise an expenditure or not. The normal stance is that where an expenditure is likely to give an enduring benefit, it is to be treated as Capital and where the benefit does not extend beyond a year, the same can be charged off in the same year. The query is whether this basis is as per Accounting Policy of each company or is it governed by the Accounting Standards issued by ICAI?

Ram Avtar Singh

Ram Avtar Singh (Expert)
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06 November 2008 its depend on nature of exps. but generly following AS issued by ICAI. and answer of your question is correct given in your question.(The normal stance is that where an expenditure is likely to give an enduring benefit, it is to be treated as Capital and where the benefit does not extend beyond a year, the same can be charged off in the same year. )

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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06 November 2008 The basis of capitalisation as you rightly raised are followed by companies, and accepted by courts also, well before the introduction of Accounting standards by ICAI. Now companies can continue the accounting polices regularly followed subject to the disclosure of deviations ,if any, from the accounting standards to comply with the provisions of 211(3C) of the companies act,1956.

Sanjay

Sanjay (Querist)
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08 November 2008 Sir,

Which Accounting Standard by ICAI are we talking off. Is it the guidance notes? Kindly clarify.

Sanjay

Sanjay (Querist)
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11 November 2008 1

Deepak Agrawal

Deepak Agrawal (Expert)
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12 November 2008 AS 10 - Fixed Assets.

It depends on mangement of company to decide whether any addition is of enduring nature. Idf yes, it should be capitalised.

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