Pre operative expenses
N.V. Siva Ram Prasad (Accounts & Audit Assistant) (261 Points)
28 August 2020
what is the treatment of pre operative expenses sir.. pls tell me
3 Replies
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 29 August 2020
They cannot be capitalised but they should be expensed.
IAS 38 and
start-up, pre-opening, and pre-operating costs [IAS 38.69]
INDAS 38
Examples of expenditures that are not part of the cost of an intangible asset are:
(a) costs of introducing a new product or service (including costs of advertising and promotional activities);
(b) costs of conducting business in a new location or with a new class of customer (including costs of staff training); and
(c) administration and other general overhead costs.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 29 August 2020
I finally found the standard for this after scanning:
expenditure on start-up activities (ie start-up costs), unless this expenditure is included in the cost of an item of property, plant and equipment in accordance with Ind AS 16. Start-up costs may consist of establishment costs such as legal and secretarial costs incurred in establishing a legal entity, expenditure to open a new facility or business (ie pre-opening costs) or expenditures for starting new operations or launching new products or processes (ie pre-operating costs).
https://www.mca.gov.in/Ministry/pdf/IndAS38_2019.pdf
I was under the wrong and old concept that start up costs are capitalised. This is new for me as well,
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