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noor4794
Unregistered Trainee
Pakistan
12 Posts |
 Posted - Feb 09 2010 : 6:59:12 PM
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| Can any body help that if a company has a general practice of not capitalizing Vehicle registration charges. Whether this practice contradict with IAS 16 or not. Should we capitalize it or not. |
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Dard
Manager
715 Posts |
Posted - Feb 09 2010 : 9:46:23 PM
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There are two criterias
for the capitalisation of assets and related costs:
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably
As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised |
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awaisaftab
Partner
Pakistan
1039 Posts |
Posted - Feb 10 2010 : 11:07:32 AM
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| As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP. |
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Dard
Manager
715 Posts |
Posted - Feb 10 2010 : 12:07:04 PM
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quote:
Originally posted by awaisaftab
As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right |
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Ajnabi
Junior
Pakistan
77 Posts |
Posted - Feb 10 2010 : 12:12:52 PM
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quote:
Originally posted by Dard
quote:
Originally posted by awaisaftab
As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right
Probably, Awais might have said about your comments to be true.
He has not taken the name afterall.
Think 10 times before posting, since these are to be gone through by the public at large. |
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awaisaftab
Partner
Pakistan
1039 Posts |
Posted - Feb 10 2010 : 12:19:59 PM
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quote:
Originally posted by Dard
quote:
Originally posted by awaisaftab
As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right
Dard you are new at this forum. Don't instruct me. |
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noor4794
Unregistered Trainee
Pakistan
12 Posts |
Posted - Feb 10 2010 : 12:41:00 PM
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quote:
Originally posted by Dard
There are two criterias
for the capitalisation of assets and related costs:
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably
As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised
How do vehicle registration charges meet with first criteria... How can you identify that economic benefits are flowing to entity....
Registration charges are assosiated costs, my main question is that whether these be included in COST of vehicle or treated as expense for the year... Hope you got my question.. |
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noor4794
Unregistered Trainee
Pakistan
12 Posts |
Posted - Feb 10 2010 : 12:49:44 PM
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quote:
Originally posted by awaisaftab
As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
You are right that its material in many cases and capitalization is as per GAAP... but whatif COMPANY has a general practice of not capitalizing registration charges... |
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Ajnabi
Junior
Pakistan
77 Posts |
Posted - Feb 10 2010 : 12:56:20 PM
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quote:
Originally posted by noor4794
quote:
Originally posted by awaisaftab
As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
You are right that its material in many cases and capitalization is as per GAAP... but whatif COMPANY has a general practice of not capitalizing registration charges...
Dear, Standards overrule company's policy, if there is a contradiction in between company's policy and standards then obviously company's policy should suitably be amended to make it in line with the applicable standard.
Registration fees should be capitalized forth with the Vehicle. |
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israrhere
Junior
86 Posts |
Posted - Feb 10 2010 : 1:24:55 PM
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In addition to the above Ias 16 also states that initial costs to be capitalized
includes the costs which are necessary for its present location and condition.As registration charges are necessary b4 we can use the asset so it shall be capitalized and we cannot expense it.
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Dard
Manager
715 Posts |
Posted - Feb 10 2010 : 5:14:46 PM
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quote:
Originally posted by awaisaftab
quote:
Originally posted by Dard
quote:
Originally posted by awaisaftab
As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right
Dard you are new at this forum. Don't instruct me.
What has that to do with the answer? I am not instructing anyone |
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Dard
Manager
715 Posts |
Posted - Feb 10 2010 : 5:21:22 PM
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quote:
Originally posted by noor4794
quote:
Originally posted by Dard
There are two criterias
for the capitalisation of assets and related costs:
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably
As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised
How do vehicle registration charges meet with first criteria... How can you identify that economic benefits are flowing to entity....
Registration charges are assosiated costs, my main question is that whether these be included in COST of vehicle or treated as expense for the year... Hope you got my question..
If the vehicles are not registered, they can't be used further. Future Cash or cash equivalents will flow to the entity if the Vehicles(assets) are used. Therefore the cost of registration will NOT be expensed to the income statement. This is my view. Other PpL's view may differ |
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Ajnabi
Junior
Pakistan
77 Posts |
Posted - Feb 12 2010 : 10:05:06 AM
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quote:
Originally posted by Dard
There are two criterias
for the capitalisation of assets and related costs:
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably
As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised
I have heard that "Criteria"(plural) or "Criterion"(singular) is a word, however, can not refrain myself to laugh after hearing a word "Criterias",
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Dard
Manager
715 Posts |
Posted - Feb 12 2010 : 11:08:07 AM
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| Mistake. I also couldn't help laughing when i saw you saying you are a qualified C.A and CMA or whatever. A so-called professional with such an illmanner. If professionals continue to be like this then this place will be nothing but a battlefield and full of chaos |
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Qureshi Muhammad Zeeshan
Unregistered Trainee
Pakistan
27 Posts |
Posted - Mar 01 2010 : 6:22:29 PM
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IAS-16 para 16(b)
"Any Cost Directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the management"
As Registration of vehicle is necessary by law for using the vehicle. therefore, with out registration vehicle is not in the condition to be used.
that's why it should be capitalized. |
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indyacctnt
Unregistered Trainee
USA
1 Posts |
Posted - Mar 24 2010 : 10:27:26 AM
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I disagree that you should capitalize registration fees. According to Principles of Accounting:
"The cost of property, plant, and equipment includes the purchase price of the asset and all expenditures necessary to prepare the asset for its intended use....
Equipment, vehicles, and furniture. The cost of equipment, vehicles, and furniture includes the purchase price, sales taxes, transportation fees, insurance paid to cover the item during shipment, assembly, installation, and all other costs associated with making the item ready for use. These costs do not include such things as motor vehicle licensing and insurance, however, even if they are paid when a vehicle purchase occurs. Expenses of this type are normal, recurring operational expenses that do not add lasting value to the vehicle."
Read more: http://www.cliffsnotes.com/study_guide/The-Cost-of-Property-Plant-Equipment.topicArticleId-21081,articleId-21075.html#ixzz0j4Icmvuv
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kamranACA
Partner
Pakistan
2320 Posts |
Posted - Mar 24 2010 : 1:32:58 PM
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Dear Indyacctnt
Registration costs of vehicles are not the recurring costs at all, so your conclusion appears to be based upon some deficient info.
Registration expenses do not include "insurance" cover costs that are obviously the vehcile running operational costs.
You buy a computer hardware as well as a licensed software. So many software are available in pirated or unlicensed versions but civilized society (and corporate sector) uses the licensed versions. All licensing costs of software are intangible assets and are capitalized as such. These do not mean to include ongoing "insurance" costs of computer hardware and informational assets or other operational recurring expenses.
Without registration, you cannot even bring your vehicle on the road "legally", you cannot use it, operate it or get any benefit from it. So, the cost that is necessary to bring an asset in a useable condition and stature, that is also a non-recurring one time cost, and the cost that ensures that economic benefits will flow-in, is to be capitalized.
I don't find any preplexed issue in its understanding that is pulling this debate so long.
Regards,
KAMRAN.
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Edited by - kamranACA on Mar 24 2010 1:35:54 PM |
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Qureshi Muhammad Zeeshan
Unregistered Trainee
Pakistan
27 Posts |
Posted - Mar 24 2010 : 1:37:37 PM
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well buddy u r right there is no such word like vehicle license fee mentioned in above para, but dear it is not possible for them to mention the name of each and every cost of items to be included in the cost of an asset.therefore, they just mentioned a few of them and remaining costs are covered in this sentence "and all other costs associated with making the item ready for use" of the above para u mentioned.
and dear its my point of view being a student that without the license fee of the vehicle it is not ready for use. |
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Sh.Mohsin
Semi Senior
Pakistan
237 Posts |
Posted - Mar 27 2010 : 2:51:53 PM
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| Final conclusion of the discussion is that license fee should be capitalized |
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Capitalization of registration charges of Vehicles
