Can anyone tell me that insurance expense incurred on new car can be capitalised or not? if yes then what is the reason behind this...
Thanks,
Parmod Rawat
2 Replies
CA Sripal Jain
(Associate Finance)
(709 Points)
Replied 29 June 2012
hi, i think it cannot be capitalised as insurance is not related to put to use,one can expense it
Sanjay Chauhan (IFRS)
(IFRS)
(2714 Points)
Replied 29 June 2012
First time insurance is considered as capital expenditure as it is necessary for 'Put to Use' criteria for assets.
Without Insurance, it cannot be on road and thus it is cost incurred for arriving at the cost which allows the car to rum on the troad for the first time.
It is similar for other services such as installation cost for ACs, transportation cost of electronic goods, heavy machinery.
It is also the first point on which the ownership along with risk and rewards pass on to the purchaser.
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