17 September 2012
Preliminary expenses to be amortized in the next 12 months will be shown as a "Other current asset" while the balance will be disclosed under "Other non current assets-unamortized expenses"
Please see the Extract of Guidance note to Revised Schedule VI issued by ICAI--
As per AS 16 Borrowing Costs ancillary borrowing costs and discount or premium relating to borrowings could be amortized over the loan period. Further, share issue expenses, discount on shares, ancillary costs-discountpremium on borrowing, etc., being special nature items are excluded from the scope of AS 26 Intangible Assets (Para 5). Keeping this in view, certain companies have taken a view that it is an acceptable practice to amortize these expenses over the period of benefit, i.e., normally 3 to 5 years. The Revised Schedule VI does not deal with any accounting treatment and the same continues to be governed by the respective Accounting Standards/practices. Further, the Revised Schedule VI is clear that additional line items can be added on the face or in the notes. Keeping this in view, entity can disclose the unamortized portion of such expenses as “Unamortized expenses”, under the head “other current/ non-current assets”, depending on whether the amount will be amortized in the next 12 months or thereafter.
17 September 2012
Preliminary expenses incurred in establishing a legal entity such as legal and secretarial costs, expenditure to open a newfacility or business (pre-opening costs) or expenditures for commencing new operations or launching new products or processes (pre-operating costs)shall always be recognised as an expense when it is incurred as per AS26. Revised schedule has not prescribed the accounting treatment.
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