Hi,
Can a public company after recieiving a grant from the government for a plant, write the plant as “net of grant” on the books?
Also, can a public company capitalize Advertising costs, Relocation costs (for moving plant management), Legal fees (patent infringment lawsuit) and Labour costs (paid during the training period).
Please reply soon.
Thanks
I guess this question falls under the accountant (tax) part.
If you buy a service insurance coverage (say for an extended auto warranty) and paid upfront (that is, its not a yearly agreement but rather a multiyear contract). Subsequently the insurance company files for banckruptcy and you have to make repairs that would normally have been covered against the coverage, can you file that as an itemized capital loss or bad debt)?
^ I doubt it hmcq, it is rare to get ded. for personal exp.
but I paid up front for all the coverage and I had accordingly planned for the coverage. Any second (or perhaps more qualified) opinions?
Re: Question for an Auditor/ Accountant
[QUOTE]
*Originally posted by Chup Chaap: *
Can a public company after recieiving a grant from the government for a plant, write the plant as "net of grant" on the books?
Also, can a public company capitalize Advertising costs, Relocation costs (for moving plant management), Legal fees (patent infringment lawsuit) and Labour costs (paid during the training period).
[/QUOTE]
Accounting and reporting rules vary from place to place. You first have to identify where you are, e.g. in Pakistan they use International Accounting Standards as accepted by ICAP and in the US they use accounting principles generally accepted in the United States (US GAAP). By your profile you seem to be in Pakistan.
On a general note, invariably accounting and tax rules vary and that is why we have permanent and temporary differences which give rise to deferred taxation.
Accounting for grants is specifically addressed in accounting rules, and if the grant was in kind, you are generally required to record it at fair value and show the credit as a donation in the P&L.
Capitalization of expenses is again an area with significant specific guidance. The general rule of thumb is that all expenses should be expensed off in the period they are incurred, unless you can prove why they should be capitalized. The rules are quite strict and typically a company can only capitalize expenses if they are incurred in the original incorporation activities e.g. legal fees etc.
Advertising costs should be expensed off, unless they are very significant and the company can make a case that it will get continuing benefits. Again accounting for advertising costs has very specific guidance in IAS rules.
Relocation of machinery is usually not capitalizable, unless its the upfront cost of receiving the machinery in the first place, in which case you can add it to the value of the machinery (not recommended but there are exceptions).
Labor costs for training period should be expensed off.
Thanks Faisal, unfortunately our group handed in the paper a day before you posted the reply. I think we messed up the labor cost because we thought it would be okay to capitalize it since it's for the future benefit.
Btw, we were using the Canadian GAAP.
Oh yeah, Chup Chaap is me :D Duh!
chup chaap bhai/behan …plz refer to IAS govt grants…i dont have them with me at the moment but will give u answer soon if u dont have IAS…