Insurance expenses at the time of purchase of new vehicle.
Generally, this expense is treated as revenue expense at the time of renewal of insurance policy. but why should we also treat it as revenue expense at the time of purchase of new vehicle.
Why first time insurance charges are not treated a part of cost of vehicle?
According to AS-10 "The cost of a fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use."
As per law it is necesary to take insurance policy of a new vehicle before operating it on road then why the insurance charges on new vehicle are treated as revenue expenses and charged against profit and loss account of the company.
Should not the first insurance charges of vehicle be treated as capital expenses (being legally necesary to bring a new vehicle into operation) and added into the cost of the vehilce?
If yes / no, please give reasons.
CAclubindia
