Treatment of lumpsum amount paid as guarantee for delayed payments

Mohit Singhal   20 September 2019

Mohit Singhal

 1 points

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My client has paid lumpsum amount of 5 cr as guarantee for next FY to the government to extend payment cycle from 2 business days to 30 business days for payments made to them.

They are normally showing it as prepaid expense right now and amortise the expense to P/L (as miscellaneous expenses) for quarterly results.

Is the treatment correct as per relevant IND AS and should it be shown as finance cost or not?

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