Whether an asset or not

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2011 Huge payment has been made to regulatory authority of a country for getting approval of a product to be sold in that country. This approval is towards getting approval of the product and also towards marketing the product in that country. This expenditure is incurred on every product the company intends to sell in the other country. Only after such approval the product can be sold on that country. Each Product has a life spam though the approval is for a lifetime. How should such Expenditure be treated.

1. Is it a Capital Expenditure or Revenue Exp?

2. If capital expenditure, will be an intangible asset?

3. If asset then shall it amortized over the life of the product

Please support your answers

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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26 September 2011 Q1 Yes, definately it is a Capital Asset in the form of Intangible Asset
as approval of other country is nothing but life-time license.
what is intangible an right to any thing ot carry an business.
As per AS 26, the value of such life shoule be amortised in the useful life of the asset

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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26 September 2011 Q2 Yes definately an Intangible Asset and asset because it is the expense which giving you the benefit for more than ane accounting year

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CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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26 September 2011 Yes, as per AS -26 it should be amortized over the life of the product