ISO CERTIFICATION CHARGE
This query is : Resolved
28 January 2011
Dear Sir,
We have paid a consultancy charge for getting
ISO certification in which account we can charge it.Can i capitalize it? in which account what is the depreciation rate it is normally issued for more than one year
we are not get the certification we only starting the initiative to get it.
pls help me
Thanks in advance
We have paid a consultancy charge for getting
ISO certification in which account we can charge it.Can i capitalize it? in which account what is the depreciation rate it is normally issued for more than one year
we are not get the certification we only starting the initiative to get it.
pls help me
Thanks in advance
28 January 2011
You can not capitalize it. it is one time payment take it as expenditure. You cannot traet as prepaid expenditure, since amount cannot be get refunded.
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28 January 2011
Dear sir,
Actually is it Goodwill to the company
it is may be issued for 5 years
its enduring nature is more than one year
can we take it as deffered expenditure ?
i get ur clerification pls give little bit clarification
Actually is it Goodwill to the company
it is may be issued for 5 years
its enduring nature is more than one year
can we take it as deffered expenditure ?
i get ur clerification pls give little bit clarification
02 January 2012
Sir,
If i Treated it as Expenditure Can In Avail the CENVAT ?
If i Treated it as Expenditure Can In Avail the CENVAT ?
02 August 2024
When dealing with consultancy charges for ISO certification, there are several accounting considerations to take into account:
### **1. Treatment of Consultancy Charges**
1. **Capitalization vs. Expense:**
- **Capitalization:** If the consultancy charges are related to acquiring an ISO certification, which is expected to provide benefits over multiple years, you might consider capitalizing these costs as an intangible asset. This is because the benefits from the certification are expected to extend beyond the current financial year.
- **Expense:** If the charges are considered preliminary or part of the initial assessment phase where no tangible asset has yet been created, they may be treated as an expense.
2. **Accounting Treatment:**
- **Intangible Asset:** If you capitalize the consultancy charges, they should be recorded under an appropriate intangible asset account. Typically, ISO certification costs could be classified under "Intangible Assets" and amortized over the expected useful life of the certification.
- **Deferred Expenditure:** In some cases, if the consultancy fee is for services not yet rendered or benefits not yet realized, you might record it as "Deferred Expenditure" and amortize it over the period in which the benefits are expected to accrue.
3. **Depreciation/Amortization:**
- **Amortization Rate:** Since ISO certification typically provides benefits over several years, you should amortize the costs over the expected useful life of the certification. A common period for amortization might be 5 years, but you should determine this based on the specifics of the certification and company policy.
4. **Goodwill:**
- **Goodwill:** ISO certification itself is generally not considered goodwill. Goodwill typically arises from acquiring a business or other intangible assets, not from obtaining a certification.
5. **CENVAT Credit:**
- **CENVAT Credit:** For a consultancy fee related to obtaining ISO certification, CENVAT credit may not be available as it is generally related to services rather than goods. CENVAT is typically applicable to inputs, capital goods, and input services related to manufacturing. However, VAT or GST credits might be applicable if the service provider is registered and the consultancy service falls under eligible categories.
### **Summary**
1. **Consultancy Charges:**
- **Capitalization:** If the certification provides long-term benefits, capitalize the charges under an intangible asset account.
- **Expense:** If the costs are for preliminary or initial phases, record them as an expense.
2. **Depreciation/Amortization:**
- **Amortize** the capitalized costs over the expected useful life (e.g., 5 years).
3. **Goodwill:**
- **Not applicable** to ISO certification costs.
4. **CENVAT Credit:**
- **Generally not available** for consultancy services related to ISO certification.
Consult with your accountant or financial advisor to ensure compliance with accounting standards and to address specific details based on your company’s situation and applicable regulations.
### **1. Treatment of Consultancy Charges**
1. **Capitalization vs. Expense:**
- **Capitalization:** If the consultancy charges are related to acquiring an ISO certification, which is expected to provide benefits over multiple years, you might consider capitalizing these costs as an intangible asset. This is because the benefits from the certification are expected to extend beyond the current financial year.
- **Expense:** If the charges are considered preliminary or part of the initial assessment phase where no tangible asset has yet been created, they may be treated as an expense.
2. **Accounting Treatment:**
- **Intangible Asset:** If you capitalize the consultancy charges, they should be recorded under an appropriate intangible asset account. Typically, ISO certification costs could be classified under "Intangible Assets" and amortized over the expected useful life of the certification.
- **Deferred Expenditure:** In some cases, if the consultancy fee is for services not yet rendered or benefits not yet realized, you might record it as "Deferred Expenditure" and amortize it over the period in which the benefits are expected to accrue.
3. **Depreciation/Amortization:**
- **Amortization Rate:** Since ISO certification typically provides benefits over several years, you should amortize the costs over the expected useful life of the certification. A common period for amortization might be 5 years, but you should determine this based on the specifics of the certification and company policy.
4. **Goodwill:**
- **Goodwill:** ISO certification itself is generally not considered goodwill. Goodwill typically arises from acquiring a business or other intangible assets, not from obtaining a certification.
5. **CENVAT Credit:**
- **CENVAT Credit:** For a consultancy fee related to obtaining ISO certification, CENVAT credit may not be available as it is generally related to services rather than goods. CENVAT is typically applicable to inputs, capital goods, and input services related to manufacturing. However, VAT or GST credits might be applicable if the service provider is registered and the consultancy service falls under eligible categories.
### **Summary**
1. **Consultancy Charges:**
- **Capitalization:** If the certification provides long-term benefits, capitalize the charges under an intangible asset account.
- **Expense:** If the costs are for preliminary or initial phases, record them as an expense.
2. **Depreciation/Amortization:**
- **Amortize** the capitalized costs over the expected useful life (e.g., 5 years).
3. **Goodwill:**
- **Not applicable** to ISO certification costs.
4. **CENVAT Credit:**
- **Generally not available** for consultancy services related to ISO certification.
Consult with your accountant or financial advisor to ensure compliance with accounting standards and to address specific details based on your company’s situation and applicable regulations.
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