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treatment of cost of licence for electricity company

CA Mallika Chaudhary (CWA Final and CA) (418 Points)

06 February 2009

Hi! Actually,I have a query related to the calculation of capital base incase of electricity companies. I wanted to specifically ask about the treatment of "cost of licence fees" ... will it be included while calculating the capital base?and if yes...then what will the exact treatment be?
Thanks and regards,
Mallika,PCC-attempt due in June'2009

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Cost of license fee is not to be included while calculating Capital base..................

CA Mallika Chaudhary (CWA Final and CA) (418 Points)
Replied 06 February 2009

Originally posted by :Md.Mosharraf Ali Raza
"	Cost of license fee is not to be included while calculating Capital base..................	"

Thanx for replying!

But why? isnt it like a preliminary expense?doesnt it fall on the assets side of a company's balance sheet?and we do include preliminary expenses also while calculating the capital base..

PS Mani (Accountant) (31 Points)
Replied 30 May 2009

I was told that :

" If it's an annual fee, it's an expense. If it's a one time fee, or a fee for a number of years, and it's transferable (ie: they can sell it to someone else) then it would be an asset to be depreciated over it's life. "

Shall we follow this rule???

subramanyam