04-04-2007, 07:25 PM
Dear Zia-ur-Rahman,
It's quite a strange transaction. Buying a report to develope a report first time heard by me.
The criteria of recognition for Property, plant and equipment is given in Paragraph 7 of IAS 16, while the recognition criteria for intangible assets is given in paragraph 21 of IAs 38.
Logically, both criterias are same i.e. probability of inflow of future economic benefits and reliable measurement of cost of asset.
Therefore, if the report is supposed to be used only for the current assignment and will contribute towards earning from the job in hand only, its cost should be charged to profit and loss account.
In contrast, if management feels that the report is a valuable guideline for future and should be retained as other library books and reference manuals, and would be used as a guideline for future assignments as well causing the inflow of economic benefits specifically attributed to holding of such report in the long-run. Its cost could be capitalized.
It's in fact a matter of management's judgment being an accounting estimate and opinion of your auditors.
This report could be capitalized as a part of library books, if decided to be capitalized.
Best regards,
Kamran.
It's quite a strange transaction. Buying a report to develope a report first time heard by me.
The criteria of recognition for Property, plant and equipment is given in Paragraph 7 of IAS 16, while the recognition criteria for intangible assets is given in paragraph 21 of IAs 38.
Logically, both criterias are same i.e. probability of inflow of future economic benefits and reliable measurement of cost of asset.
Therefore, if the report is supposed to be used only for the current assignment and will contribute towards earning from the job in hand only, its cost should be charged to profit and loss account.
In contrast, if management feels that the report is a valuable guideline for future and should be retained as other library books and reference manuals, and would be used as a guideline for future assignments as well causing the inflow of economic benefits specifically attributed to holding of such report in the long-run. Its cost could be capitalized.
It's in fact a matter of management's judgment being an accounting estimate and opinion of your auditors.
This report could be capitalized as a part of library books, if decided to be capitalized.
Best regards,
Kamran.
