03-17-2009, 07:22 PM
Here is a situation
Net losses from trail run amounting to over two hundred millions during current accounting year have been capitalized.
Aggregate net losses of over six hundred millions in total capitalized over a period of over eight years (4 months each during current and previous financial year)
These capitalized costs have been allocated to âBuildings, plant & machineryâ.
Please note that paragraph 17 (e) of International Accounting Standard -16 (IAS-16) deals with capitalization of cost of testing whether the asset is functioning property, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment).
Whereas in case of the Company sales volume of over a billion rupees have been generated from expansion plant during the four months of current financial year.
In my view it does not qualify for capitalization of net loss from operations merely on the grounds that there were intermittent shut downs of the plant. Although the Company has produced vendors certificate which states that the Company can start commercial production w.e.f. 01.11.09 which is the same date till which the net loss has been capitalized, treating it as a trial run loss.
I would request expert opinion in this regard.
thanks in advance.
best
malik
Net losses from trail run amounting to over two hundred millions during current accounting year have been capitalized.
Aggregate net losses of over six hundred millions in total capitalized over a period of over eight years (4 months each during current and previous financial year)
These capitalized costs have been allocated to âBuildings, plant & machineryâ.
Please note that paragraph 17 (e) of International Accounting Standard -16 (IAS-16) deals with capitalization of cost of testing whether the asset is functioning property, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment).
Whereas in case of the Company sales volume of over a billion rupees have been generated from expansion plant during the four months of current financial year.
In my view it does not qualify for capitalization of net loss from operations merely on the grounds that there were intermittent shut downs of the plant. Although the Company has produced vendors certificate which states that the Company can start commercial production w.e.f. 01.11.09 which is the same date till which the net loss has been capitalized, treating it as a trial run loss.
I would request expert opinion in this regard.
thanks in advance.
best
malik
