Capitalization

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 March 2010 Hi,
While capitalizing a new plant installed in factory should we also capitalize engineering fees paid during construction of plant as technical know how?
A contract was given to one party for engineering services, Engineering fees are paid towards (1) inspection of material purchased from other side
(2) inspection of work done by other service provider
(3) Manpower expenses paid to engineers of this said party (as per agreement)

Under which head these expenses should be capitalized - as engineering fees with total cost of plant or as technical know how?

Bimal Thacker

Bimal Thacker (Expert)
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09 March 2010 According to me, it should be capitalised with total cost of plant and machinery

vrnanda

vrnanda (Expert)
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13 March 2010 hi buddy.

while ascertaining the cost of the asset. All the costs should be capitalized which are necessary to bring the asset to the indended use for business.

here in this case, the expenses incurred should be capitalized as the costs are related to inspection and labour charges of inspectors who are qualified and incurred only for this asset. hence these are the costs directly attributable to the asset. hence the total costs incurred should be capitalized along the with asset.

hope this will clarify your queries.

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