Dear Friends,
We bought a vehicle and insured it before bringing it to use.
Now, my concern is, As per IAS 16, do we have to capitalise the insurance charge also on total cost of vehicle ?
or, it is possible to book insurance charges as direct expense. We prefer this option because It will be beneficial for us to reduce taxable profit.
I seek your suggestion.
Thanks & Regards.
If insurance was for transit only, capitalize it. If normal year-round insurance, treat it as indirect expense.
Thanks Deepesh....
Actually, my concern is... it is general practice to capitalise insurance charge for the very first time.... but i want to know what IAS 16 says about it...
It tells you to do exactly what i said in my previous post. So even first time insurance charges should not be capitalized if they are round-the-year charges.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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