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AS 26 and Preliminary Expenses

anish (Chartered Accountant) (118 Points)

25 June 2009

Dear friends,

what is the treatment of preliminary expenses as per AS 26. Should it be written off inthe year of incurring itself or be deferred over a period of years?

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RAMANJU (here to updating the knowledge) (485 Points)
Replied 25 June 2009

As per AS- 26 "Intangible Assets", Intangible assets should be recognised when there is assets' characteristics and there is probable future economic benefits from the asset. As per the Standard, the preliminary expenditure should be written off in the year of incurring as it does not have assets' characteristics. Assets characteristic means, Identifiablity, Resource controlled by an enterprise & future economic benefits.