Whether amount paid to Govt organisation capitalised or not?

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This discussion explores whether costs incurred for EV model approvals from organisations like ARAI and ICAT, as well as land booking fees paid to the Rajasthan government, can be capitalised. The consensus suggests that approval expenses can be capitalised as model development costs, and land booking amounts can be capitalised to the land asset. This treatment is guided by Accounting Standard (AS) 10. However, there's a query regarding the treatment of prior year expenses, with the advice being to continue expensing them if previously treated as such, unless specific circumstances allow for retrospective adjustment.

Ninad

Ninad (Querist)
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24 June 2020 Hello Experts,

We are a Manufacture of Electric Vehicle. For getting approval of the vehicles for manufacturing we are required to get the model approved from various organizations like ARAI, ICAT, etc. Only after the approval of such organizations, we can start manufacturing the vehicles. My question is whether such fees paid can we capitalized or are these required to be shown as expenses. Also, we have paid land booking amount for the land allotted by Rajasthan govt. Whether such land booking amount is capitalized or not???

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 June 2020 Yes such approval expenses can be capitalised to the model development expenses.
Land booking expenses capitalise to land.

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Ninad

Ninad (Querist)
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26 June 2020 Sir can you please explain under which AS does this treatment is possible?? and last year we have shown the same cost as expenses?? can we show the amount now as capitalized??

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 June 2020 Last year you have expensed such expenses continue to expense this year.

Ninad

Ninad (Querist)
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04 September 2020 Thank you sir

But can you please mention the provision so that we can explain the director???
And can we cumulatively booked last year exp and current year expenses as assets?? If yes where it is mentioned??

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 September 2020 Refer AS 10 accounting standards.

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