Deff. Revenue Expenditure
This query is : Open
Rajesh Goyal
(Querist)
15 September 2010
Dear Experts,
A Pvt. Ltd. co. is setting up its factory in a remote area where no electric connection is available. The co. has incurred Rs. 458220/- to bring electric connection to its factory area and for setting up of electric poles.
What shuold be the accounting for above expenditure.
Whether it should be treated as deferred revenue expenditure, and if yes, what amount should be written off during the year and in how many years.
The factory is still under construction.
Regds,
A Pvt. Ltd. co. is setting up its factory in a remote area where no electric connection is available. The co. has incurred Rs. 458220/- to bring electric connection to its factory area and for setting up of electric poles.
What shuold be the accounting for above expenditure.
Whether it should be treated as deferred revenue expenditure, and if yes, what amount should be written off during the year and in how many years.
The factory is still under construction.
Regds,
15 September 2010
Ref AS 26: Are the following criteria met?
(i)Identifiability
(ii)Control over the asset
(iii)Future economic benefits
(iv)Cost can be measured reliably
If yes,then the expenditure can be recognised as deferred revenue expenditure.The amortisation (writing off)of the expenditure will be over,
(a) the best estimate of its useful life?
(b)If not as per (a), over 10 years?
(c)If not as per (a) or (b), then as per persuasive evidence that the useful life is longer than ten years
(i)Identifiability
(ii)Control over the asset
(iii)Future economic benefits
(iv)Cost can be measured reliably
If yes,then the expenditure can be recognised as deferred revenue expenditure.The amortisation (writing off)of the expenditure will be over,
(a) the best estimate of its useful life?
(b)If not as per (a), over 10 years?
(c)If not as per (a) or (b), then as per persuasive evidence that the useful life is longer than ten years
Rajesh Goyal
(Querist)
15 September 2010
when will the amortisation begin, the co. has not statrted its business operation during the year.
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