treatment of insurance expenses

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vineet (Querist)
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18 August 2007 what will be the treatment of insurance expenses paid for the first time on purchase of a new vehicle-whether it is to be capitalised or not?

SUBRAMANIA SARMA G

SUBRAMANIA SARMA G (Expert)
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19 August 2007 All expenses that are incurred in bringing the asset to the present location and usage requires to be capitalised. Since the vehicle is not to be on road unless the same is properly insured as per the MV Act, the insurance premium paid for the first time requires to be capitalised

CA Sandeep Jhawar

CA Sandeep Jhawar (Expert)
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19 August 2007 All hte expenses incurred for the asset to put in use for the first time is to be capitalized.

So the insurance expenses paid for the first time is in the nature of capital expenditure, it is to be capitalized.

Raj

Raj (Expert)
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19 August 2007 DEFINITELY IT MUST BE CAPITALISED.

CA Manish Iyer

CA Manish Iyer (Expert)
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19 August 2007 Only the third party liability part should be capitalized as this is the part of insurance expenses without which the vehicle cannot be made available for use. However, one should consider materiality aspect to this.

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CA Ankur Jain

CA Ankur Jain (Expert)
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20 August 2007 As far as accounting is concerned, it must get capitalised.
But in the point of view of Audit, materiality need to be seen. Other things as mentioned above.

Jitender

Jitender (Expert)
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22 August 2007 i agree with views given above about capitalization.

CA PARTH SHAH

CA PARTH SHAH (Expert)
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17 April 2013 In a public limited oe listed companies the the amount of premium of insurance will always be immaterial amount. So if we treat the the first insurance premium as revenue expenditure, the basic provisions of AS 10 will always get violated by following materiality priciple. Hence whether material amount or not, the first premium of car insurance should always be capitalised