Import Insurance Policy Accounting when Material received in next FY

Save Share

This query is : Resolved

Quick Summary

This discussion addresses the accounting treatment for import insurance premiums paid in one financial year (2020-21) for machinery actually received in the next (2021-22). The consensus is that since the machinery is capital in nature and likely transferred ownership on 31st March under FOB terms, the insurance expense, along with other associated costs like transport and customs duty, should be capitalised under 'Machinery under transit' and eventually capitalised with the machinery itself. This means the expense is booked in the financial year the asset is received and capitalised.

Vipul Acharya

Vipul Acharya (Querist)

28 May 2021 Dear Sir,

We have taken insurance against import of machinery on 12.03.2021 but machinery in actual received on 12.05.21 (due to ocean transit)

Now, where to book Rs. 10000 /- Insurance Expense in FY 2020-21 or FY 2021-22,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

28 May 2021 Open machinery account under transit, book amount payable on foreign vendor and insurance expenses.
The ownership of machinery might have been passed on to you as on 31st March as import terms are on FOB basis.

Vipul Acharya

Vipul Acharya (Querist)

03 June 2021 Machinery under transit account under Current Asset or under which head and expense to Insurance to capitalied after valuation of machine on the basis of bill of entry please confirm

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

03 June 2021 It's capital goods in transit, as machinery will be capitalised. Include insurance expenses also under capital goods in transit.
Capitalise all expenses including transport, handling, customs duty, clearance charge and commissioning expenses.

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