Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Treatment of insurance on fixed assets

Ranjith Makam (Employment) (55 Points)

12 August 2013

Whether first Insurance on a vehicle(Fixed Asset) aquired is to be capitalised/ not ?

Reply
Follow
Share

3 Replies

CA Aditya (CA ) (527 Points)
Replied 13 August 2013

Dear Ranjit,

It has to be capitalized.

As per the AS 10 all the incedental charges while purchaing the assets needs to be capitalized.. Incedental changes includes insurance also.

Regards

Vikram Bhatia (CA Final) (122 Points)
Replied 13 August 2013

Dear Ranjith,

Yes, it has to be capitalized as every expense done while purchasing assets is to be added to its cost

And, if such exp has been done after purchasing the asset then it should be treated as a revenue expense.

But now a days, generally the insurance is made at the time of its purchase so it is definitely to be capitalized.

Hope, it will help you...!!!

Atul Jain (ASS MGT ) (21 Points)
Replied 01 August 2014

If it is compulsory to have insurance for asset to make it in ready to use condition , it should be capitalized (like vehicle insurance) since it is a matter of compulsion.Also transit insurance could be capitalized on CWIP .However any insurance taken for post put to use date; and also which is not a mandatory condition for asset to be ready to use should be expensed and not captitalized.