Capital or Revenue Expenditure
This query is : Resolved
06 August 2010
Dear Experts,
Whether 1st year insuranceof vehicles is Capital Expenditure or Revenue Expenditure.
In case of purchase of vehicles, the financiers require that the vehicle is adequately insured.
Please opine with reason.
Thanks & Regards,
Whether 1st year insuranceof vehicles is Capital Expenditure or Revenue Expenditure.
In case of purchase of vehicles, the financiers require that the vehicle is adequately insured.
Please opine with reason.
Thanks & Regards,
06 August 2010
Without first insurance the car cannot be brought out of the showroom and hence is needed to make to ready for its intended use and hence the same should be capitalised as per AS - 10.
06 August 2010
Thanks Maheswarijee.
06 August 2010
I have slightly different opinion.
May be that without insurance vehicle cant be deelivered to customer due to traffic or other laws but it has nothing to do with bringing the asset to existance/use. Moreover, this expense is of recurring nature, which cant be capitalised at every instance.
Therefore adhering to Substance over Form, we should charge this expense to P&L as period cost.
May be that without insurance vehicle cant be deelivered to customer due to traffic or other laws but it has nothing to do with bringing the asset to existance/use. Moreover, this expense is of recurring nature, which cant be capitalised at every instance.
Therefore adhering to Substance over Form, we should charge this expense to P&L as period cost.
06 August 2010
Only the first time insurance needs to be capitalised not subsequent payments.
06 August 2010
Agree with Aditya ji. In our companies we also capitalise first insurance because it is a cost directly attributable to bringing the asset to its working condition or for its intended use.
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