Teratment of preoperative expanditure

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CA Ankita Sahlot (Querist)
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21 May 2012 A broadcasting company expended huge amount on survey before commencement of production but after incorporation. The company allocated whole expenditure on its fixed assets proportionately.
what should be perfect treatmentr...

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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21 May 2012 Need more facts.

If the survey was for set of the business whihc it eventually did of will do, then it may be considered eligible for capitalisation and receoved over the useful life.

Otherwise expensed to income statement.

CA Ankita Sahlot

CA Ankita Sahlot (Querist)
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22 May 2012 sir,
Company publishes newspaper. Before it start production it have done survey for 6 month. Survey expenditure include all revenur expenditure like salary, paper exp. rent.
Can we transfer it into preoperative exp. and amortise in subsiquent 10 years like preliminary exp.
or
transfer whole exp. into P&L account cosidering them as revenue exp.

CA Ankita Sahlot

CA Ankita Sahlot (Querist)
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22 May 2012 Sir, one more ques.
will it make any diff if this amt expended in 2008 now if we found that company have done wrong treatment of expended amount, whether we have to make adjustment.

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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22 May 2012 It seems to be revenue expenditure and hence should be expensed as incurred.

It does not satisfy the crterion of AS 10.

You may assess the criterion of AS 26. If it satisfgies then capitalise as intangible. Though first impression is that it will not.

CA Ankita Sahlot

CA Ankita Sahlot (Querist)
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23 May 2012 sir it means we should not capitalise exp in any manner because it don't have future economic benefits. Sir as you know exp have already been capitalised. so what shuold be next step. should we change it retrospectively or continue with it.

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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23 May 2012 If it is capitalised in past, there must be some more basis for such.

If the previous period audit is over, you may look for issues arising in the open period for audit and not reopen past files unless if it has a huge impact on true and fair view.

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