09 September 2011
can heavy advtg expenditure incurred for creation of brand in the market be treated as an extra-ordinary item for the purpose of declaration of dividend under section 205 of the companies act. kindly advise
Extraordinary items are income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly; for example, attachment of property or an earthquake.
Virtually all items of income and expenditure arise in the course of ordinary activities. Restructuring costs, disposal of fixed assets or long term investments, litigation settlements, etc are all in the nature of ordinary activities.
Advertising is an ordinary business activity even if it is mass scale and high in amount and thus should not be disclosed as Extra ordinary item.
CAclubindia
