Treatment of Preliminary Exp. in books

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CA Sahil Singla.. (Querist)
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15 April 2011 Sir
As per AS 26, Intangible Assets, Preliminary Expenses incurred by entity should be written off as soon as it is incurred. So,does it mean that we have to prepare profit & loss A/c for the periods before the entity comes into Existence ?
How can be this done ? Please Clarify bcoz we usually don't prepare such P/l A/c & write off preliminary Exp. in 5 years from the year the entity come into existence.

Kumar Babu.G

Kumar Babu.G (Expert)
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15 April 2011 It is a debatle point.many companies won't prepare P&L a/c during constrcution stage.But P&L a/c has to be prepared as far as my knowledge and experience is concerned in the cases you have mentioned.

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CA Sahil Singla..

CA Sahil Singla.. (Querist)
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15 April 2011 According to me, the reason behind this could be Income Tax Act.
Entities write off preliminary Exp. in 5 years as per Income tax act & not as per AS 26, which is a wrong practice.
But on the other side question arises that how can a P/l A/c can be prepared without entity coming into existance ?