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Expenditure during construction period

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Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2012 There is a Company which is incorporated on Sept 2011, but there was no commercial production till 31st Macr,2012. So the expenses incurred, ie administrative and general expenses , wud be shown as pre-operative expenses & capitalised or will be charged to P&L ??
Also wud like to know wether P&L a/c will be prepared or Development of Expenses a/c ??
Also will depriciation be charged on other assets if they have been put to use ?

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)

27 June 2012 Administrative expenses incurred before commercial production are expenses in the P&L account and thus flow to retained earnings even if it is in negetive.

If there is some trial run conducted during the period, the same is disclosed seperately in notes and the net gain / loss is capitalised.

If during the period, there were assets that were put to use, depreciation has to be caculated and charged to P&L.
- If teh asset is used for trial run, then it is part of trial run P&L in notes and gets capitalised.
- if not, then expense in P&L and carry to retained earnings.

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