Friends can u pls tell me is there any amendments to AS 26.
In our financial statements we debit 1/5th of the preliminary expenses in the first year of commencement of business, is there any requirement somewhere in AS or Act to debit whole exp regarding Preliminary expenses in first year.
Deepika
There is no amendment in AS-26, 1/5 only can be written off in every year
Thanks a lot Poonam.
Poonam mam,
Cant the company write off the prem exp according to wish of its management.Usually its 1/5th every yr and if it can prove the life is more than 10 yrs then for such a period. And if the company wishes so cant it write it off fully in the same yr ???
The period over which these preliminary expenses are to be amortised is best left to the judgment of the directors of the company. AS 26 suggests writing off intangible assets over a period of 10 years, though a different period is permissible if it is justified in the opinion of the management. It is a common practice to write off these preliminary expenses in a period of five years, though there is no legal provision to this effect. A company can as well write off its preliminary expenses in the same year as it incurs.
This is an article on this subject..Guess this is right
Thanks a lot Hareesh....
Your welcome Deepika. But this was an article some time back. So make sure am right within my limited knowledge. But i do think there is no strict rules which says of writing it off in a particular number on years. And 1/5 th is the usual practise
What would be the case if preliminary exp are written off from balance in Securities Premium A/c. . What would be the scenario in Income Tax then as preliminary exp are not debited to P&L A/c.
Again what would be the scenario from AS 22 point of view as this will be treated as permanent of temporary difference.
CAclubindia
