Sir/Madam
I would like to know in which year had the institute removed the provision for recording preliminary expenses and deffering the same as a fictitious asset? There are a few companies which still continue to record preliminary expenses and continue writing it off over a period of 5 yrs
Thanking you
CA Tushar Singhania
As per para 56 of AS 26, preliminary expenses should be writen off in the year in which are incurred. The 5 year write off provision is available under the IT Act and not under Accounting Standards.
For accounting purpose, write it off completely in the 1st year itself and create a deferred tax asset with respect to the 4/5th portion that will be disallowed while computing current years income tax and will be allowed in later years
| Originally posted by : CA Harsh Lunia | ||
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As per para 56 of AS 26, preliminary expenses should be writen off in the year in which are incurred. The 5 year write off provision is available under the IT Act and not under Accounting Standards. For accounting purpose, write it off completely in the 1st year itself and create a deferred tax asset with respect to the 4/5th portion that will be disallowed while computing current years income tax and will be allowed in later years |
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Perfect Answer!!!
CAclubindia
