Pls solve this query...
Co. under expansion program has imported machinery and had taken EPCG license and got concessional rate of custom duty.
bank has given the gurantee to govt. that the co. will export five times the amount of duty saved in 5 years.
co. has paid some gurantee charges to bank.
what will be treatment of these gurantee charges?
They will be capitalized or transferred to revenue?
As per AS-10 Accounting for fixed assets, any expenditure incurred which is incidental to bringing the assets to it's present location & condition is requried to be capitalised.
Hence if the bank gurantee charges are incidental to the import of machinery, they wud be capitalised or else will have to expensed out.
Bank Charges has to be accounted in P&L
But
The amount of BG to be in th Current Asset
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