As-26

This query is : Open

Ananta prasad tripathy (Querist)
Follow

30 December 2010 As per AS 26 para 56 In some cases, expenditure is incurred to provide future economic benefits to an enterprise, but no intangible asset or other asset is acquired or created that can be recognized. In these cases, the expenditure is recognized as an expense when it is incurred.

For example, expenditure on
research is always recognized as an expense when it is incurred.

Others include

Expenditure on start-up activities (start-up costs), unless this
expenditure is included in the cost of an item of fixed asset under AS 10.

Start-up costs may consist of preliminary expenses incurred in establishing a legal entity such as legal and secretarial costs.

Expenditure to open a new facility or business (pre-opening costs)

Expenditures for commencing new operations or launching new products or processes (pre-operating costs);

Expenditure on training activities; Expenditure on advertising and promotional activities

Expenditure on relocating or re-organising part or all of an enterprise.

I want to know whether the conclusion drawn below from the above statement is correct or not.

That means issue expenses relating to shares either by a new company or an existing company is to be treated as an expense.As this is an expenditure in the nature of advertising or promotional activity.That means now the concept of deferred revenue expenditure in no more even schedule VI format prescribes for it?

Vivek Raju P

Vivek Raju P (Expert)
Follow

31 December 2010 Yes as per AS 26 in cases where there is uncertanity of the future economic benefits flowing to an entity based on the expenditure, then such an expenditure may not be capitalised as an intangible asset.

Similarly expenses like preliminary expenses incurred for incorporation of the company and in your case share issue expenses may not be capitalised, the future economic benefits that will arise to the enterprise as a result of these expenses cannot quantified.

Say if you want to get funds by issuing the shares and assume that u get them on the basis of a long term loan... for which some processing or syndication fees is charged. You cannot capitalise these expenses, My view is that both are similar.

Hope some one will be able to clarify better.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now