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+--- Thread: Capitalize or charge out (/thread-capitalize-or-charge-out)
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- kamranACA - 11-08-2007
Dear,
I think ur latest post is a comment on the situation and does not need further clarification.
Regards,
Kamran.
- Schuaeb - 11-14-2007
Dear Kamran,
As considered by some people, deferring pre-operating expenses untill the start of normal business activities are not exactly deffering cost. I mean in practice we can see two situations. Some companies are making profit and loss account before the start of normal business activities. Other are following the same practice that is they are deferring pre-operating expenses untill the start of normal operations. And I think they are able to do it as there are no clear cut instructions regarding deferring of pre-operating expenses even in revised fourth and fifth schedule. However, in this case I think after the start of business operations these companies have to expense these deferred expenses (deferred after the revision) instead of following their amortization policy.
Your opinion will help in further clarification.
Regards
- kamranACA - 11-14-2007
Dear,
I am of determined view that now if some company (not a small company) will adopt the practice of deferring its pre-operating costs, it will be a non-compliant and may face inquiries.
In my view now there is no room of non-preparation of profit and loss account during pre-operting period.
However, test run costs capitalized as part of Propety, Plant and Equipment covered in IAS 16 are something different. These are not basically the deferring of costs. If you need discussion on it, plz let me know.
Regards,
Kamran.
- Schuaeb - 11-18-2007
Test cost is definitely different thing. I was talking bout normal pre-operating expenses (admin expenses being a part of them)
Your view sounds logical, and things will be cleared furhter by passage of some time. However, some companies (private) have continued the same practice for this year.
Anyways thanks a lot for your consideration and help