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Accounting standard on insurance premium paid
We have purchased Rail Locomotive worth Rs.1.50 Cr for factory's uses. We have also taken insurance coverage to be renewed every year. Accounts Dept mentions that the first insurance premium is to be capitalised. But is it logical when it is only annual policy. What AS / Guideline States.
Replies (1)
If the condition is such that you can not operate the machine (accounting terminology: PUT TO USE) without taking the insurance cover , then the insurance premium has to be capitalidsed otherwise it will be deferred revenue expenditure to be allocated over the period.
regards
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