Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Fixed Assests

Sorabh Gupta (Manager ( Taxation )) (877 Points)

10 June 2009

Dear All

What is included in capitalised amount of asset..........

Like if before purchase a assest i got the service of consultant for that particular asset then , would that expenses be capitalised...................

And would insurance expenses will be capitalise along with the cost of asset.

Reply
Follow
Share

16 Replies

Jyoti Malik (ACCOUNTANT) (2644 Points)
Replied 10 June 2009

Yes, insurance expenses will be capitalise along with the cost of asset.

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 10 June 2009

Will it be the first insurance OR some thing else ...............

And what about Consultant fees,,,,,,,,,,,,,,,,,,,,,,,

(Guest)

Only First time insurance capitalised and the consultany charges paid for purchasing of Assets are also capitalised

Jyoti Malik (ACCOUNTANT) (2644 Points)
Replied 10 June 2009

Sorry No Idea about consultant fee..........

First Insurance will be capitalize

RAMANJU (here to updating the knowledge) (485 Points)
Replied 10 June 2009

All Expenditures incidental to acquision or construction of an asset before put to use must be capitalised. (AS - 10 & AS - 16)

Jyoti Malik (ACCOUNTANT) (2644 Points)
Replied 10 June 2009

Thanks Mr. Ramanju

Arindam Roy (ERP - Financial consultant) (38 Points)
Replied 10 June 2009

.Yes, Consultant fees paid before the asset put into use should be capitalised

. Cost of the asset include Purchase price + Other Incidental cost (Capitalised portion of Insurance expenses)

anil Kabra (CA, CS INTER) (40 Points)
Replied 10 June 2009

All the expenses incurred before the assets put to use should be capitalised either it is Insurance or consultancy fees. but it should be one time payment .Similarly Interest on loan taken for purchasing an assets will not be part of cost as at regular interval interest payment will be made, So this exp. will charged to revenue Expenditure

RAMANJU (here to updating the knowledge) (485 Points)
Replied 10 June 2009

Mr. Anil, The borrowing cost incurred on assets construction which may take a longer period should be capitalised till the completion of all activities to put to use such an asset. ( AS - 16).

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 10 June 2009

Here the question asked is whether the insurance & consultancy charges can be capitalised or not. The answer is only first insurance premium paid & consultancy charges are to be capitalised.

Borrowing cost is to be capitalised only if the gestation period is long and it takes a asset long time to be put to use.

chintan mehta (Chartered Accountant) (445 Points)
Replied 10 June 2009

all costs need to be captilised.

anil Kabra (CA, CS INTER) (40 Points)
Replied 11 June 2009

Mr.Ramanju I am agree only that Borrowing cost should be capitalised only in that assets which will take long time to become an assets. otherwise borrowing cost shold not be capitalised.