Whether to capitalize or expense out
This query is : Resolved
07 January 2016
Dear Sir/Madam
In our case we have gone for purchase of one of the plant of other company which include all assets including employee as well as whole setup of the plant. For which we have incurred Due diligence cost as well as fees also paid to cci (Competition commission of India) and other related expenses.In this case we are confused between applicability of Accounting standard i.e whether Accounting standard applicable will be AS 10 Fixed asset or AS 14 Amalgamation. In addition to this whether the cost mentioned above (i.e Due diligence cost as well as fees also paid to cci (Competition commission of India) and other related expenses) will be capitalize or have to route through revenue.
Please guide.
Regards
Nilesh
In our case we have gone for purchase of one of the plant of other company which include all assets including employee as well as whole setup of the plant. For which we have incurred Due diligence cost as well as fees also paid to cci (Competition commission of India) and other related expenses.In this case we are confused between applicability of Accounting standard i.e whether Accounting standard applicable will be AS 10 Fixed asset or AS 14 Amalgamation. In addition to this whether the cost mentioned above (i.e Due diligence cost as well as fees also paid to cci (Competition commission of India) and other related expenses) will be capitalize or have to route through revenue.
Please guide.
Regards
Nilesh
Guest
Guest
(Expert)
08 January 2016
AS 14 will apply only in case of amalgamation. But your case is only a plain acquisition of asset - which is plant. The cost of plant should include fees paid to CCI if those approvals are required for the acquisition of plant. So AS 10 is relevant. However in my opinion Due diligence fees should charged to revenue since it is uncertain until the completion of due diligence if the plant would be acquired.
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08 January 2016
Thanks sir for your valuable reply.
You mean to say that there is uncertainty related to acquisition of plant i.e whether we will acquire it or not and hence the cost of due diligence incurred initial stage of acquisition can not be co - relate or treat as directly attributable to acquisition of plant. Am I correct ?
You mean to say that there is uncertainty related to acquisition of plant i.e whether we will acquire it or not and hence the cost of due diligence incurred initial stage of acquisition can not be co - relate or treat as directly attributable to acquisition of plant. Am I correct ?
Guest
Guest
(Expert)
08 January 2016
Yes. That's my point. Hope ur query is clarified
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