01 July 2010
A company has commenced its production activities this year. The company during the previous year disclosed all its fixed assets (plant & machinery, building etc) under capital work in progress and other expenses incurred for the project under the head pre-operative expense which separately shown in the previous year balance sheet. This year all the assets were ready to use and has been capitalised. The pre-operative expenses were allocated on pro-rata basis. Last year, in notes to accounts, it was separately disclosed that pre-operative expenses are shown separately as it has to be capitalised on commencement of busines operations. How should i disclose in notes to accounts that i have capitalised the pre-operative expenses on pro-rata basis. Is there any restriction on capitalisation of pre-operative expense on pro-rata basis as per Guidance note.
02 July 2010
To the best of my knowledge, there is no such restriction. A disclosure by way of notes to account should be made stating that pre-operative expenses are capitalised on pr-rata basis on the allocable assets.
CAclubindia
