To Write of f preliminary expenses

This query is : Resolved

Nilesh Jain (Querist)
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27 May 2008 As per AS 26 whether preliminary expenses are to be written off immediately and not to carry over the period of years? If yes then from when it is applicable?

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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27 May 2008 AS 26 suggest that prelim exp. may be written off over 10 years period.

CA. Vineet Grover

CA. Vineet Grover (Expert)
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27 May 2008 Hi Nilesh,

Accounting Standard 26 - Intangibles.

Amortisation Period
Paragraph 63.
The depreciable amount of an intangible asset should be allocated
on a systematic basis over the best estimate of its useful life. There is a
rebuttable presumption that the useful life of an intangible asset will not
exceed ten years from the date when the asset is available for use.
Amortisation should commence when the asset is available for use.

Paragraph 56
In some cases, expenditure is incurred to provide future economic
benefits to an enterprise, but no intangible asset or other asset is acquired or
created that can be recognised. In these cases, the expenditure is
9 Accounting Standard (AS) 28, ‘Impairment of Assets’, specifies the requirements
relating to impairment of assets.
Intangible Assets 521
recognised as an expense when it is incurred. For example, expenditure on
research is always recognised as an expense when it is incurred (see
paragraph 41). Examples of other expenditure that is recognised as an
expense when it is incurred include:
(a) expenditure on start-up activities (start-up costs), unless this
expenditure is included in the cost of an itemof fixed asset under
AS 10. Start-up costs may consist of preliminary expenses
incurred in establishing a legal entity such as legal and secretarial
costs, expenditure to open a newfacility or business (pre-opening
costs) or expenditures for commencing new operations or
launching new products or processes (pre-operating costs);

Rgds/
Vineet

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R.V.RAO

R.V.RAO (Expert)
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27 May 2008 PREL. EXP. CAN BE WRITTEN OFF IN 10 YEARS.
THIS IS WHAT IS SAID UNDER AMORTISATION PERIODUNDER AS 26 ALSO AS STATED BY SRI VINEET.
SEC 35 D OF IT ACT ALSO STATES THE SAME.
R.V.RAO