Capitalization of insurance amount

NO, IT MUST HAS TO BE CHARGED TO REVENUE OVER THE PERIOD FOR WHICH SUCH PREMIUM PAID.

REGARDS,

MANOJ

IF INSURANCE AMOUNT IS INCLUDING IN INVOICE THEN MUST BE CAPITALISED. IF U HAVE PAID THE INSURANCE AFTER PURCHASE THE CAR THEN WOULD BE TREATED AS REVENUE EXP.

Originally posted by : JINESH SHAH
	1ST TIME INSURANCE PAID SHOULD BE CAPITALISED & RENEWAL PREMIUMS SHOULD BE EXPEMSED..

I agree with him... This is should considered like Vehicle registration fees.. One Time expenses will be booked under the Capital Expenditure.. Renewal Charges will be booked as Revenue expenses..

1st yr premium should be capitalized but renewal premium should be treated as revenue expense

There is no confusion at all. It is also clear that insurance is always paid first to cover insurance for future period . If an assets has not been used then all revenue expenses paid before put to use mus be capitalised including insurance premium. For example if a ready made assets is purchased like school bus where no body building is not necessary then the 1st insurance premium paid must be treated as revenue expenditure. On the other hand if a chasis is purchased and suppose  3 months period is taken for body building then insurance premium paid for 9 month will be treated as revenue expenditure & insurance amount for 3 months (during body building period) mus be capitalised. The idea of capitalised 1st insurance may not applicable for all cases. Insurance Premium itself is a revenue expenses and depending upon the circumstances it has to capitalised.

- TARUN --

Insurance amount cannot be capitalized as it is only for one year and does not enhance any value for bringing asset in to existence. Also in case of RTO taxes are for 15 years hence should part of cost of asset bu in case insurance in first year it has to treated as revenue expenses.