Capitalization of registration charges of Vehicles

noor4794 · 02-09-2010, 11:59 PM

Can any body help that if a company has a general practice of not capitalizing Vehicle registration charges. Whether this practice contradict with IAS 16 or not. Should we capitalize it or not.

Dard · 02-10-2010, 02:46 AM

There are two criterias
for the capitalisation of assets and related costs
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably

As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised

awaisaftab · 02-10-2010, 04:07 PM

As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.

Dard · 02-10-2010, 05:07 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
<hr height="1" noshade id="quote"></blockquote id="quote">
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right

Ajnabi · 02-10-2010, 05:12 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Dard
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
<hr height="1" noshade id="quote"></blockquote id="quote">
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right
<hr height="1" noshade id="quote"></blockquote id="quote">

Probably, Awais might have said about your comments to be true.
He has not taken the name afterall.[8D]

Think 10 times before posting, since these are to be gone through by the public at large.[)]

awaisaftab · 02-10-2010, 05:19 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Dard
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
<hr height="1" noshade id="quote"></blockquote id="quote">
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right
<hr height="1" noshade id="quote"></blockquote id="quote">

Dard you are new at this forum. Don't instruct me.

noor4794 · 02-10-2010, 05:41 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Dard
 There are two criterias
for the capitalisation of assets and related costs
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably

As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised
<hr height="1" noshade id="quote"></blockquote id="quote">

How do vehicle registration charges meet with first criteria... How can you identify that economic benefits are flowing to entity....

Registration charges are assosiated costs, my main question is that whether these be included in COST of vehicle or treated as expense for the year... Hope you got my question..

noor4794 · 02-10-2010, 05:49 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
<hr height="1" noshade id="quote"></blockquote id="quote">

You are right that its material in many cases and capitalization is as per GAAP... but whatif COMPANY has a general practice of not capitalizing registration charges...

Ajnabi · 02-10-2010, 05:56 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by noor4794
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
<hr height="1" noshade id="quote"></blockquote id="quote">

You are right that its material in many cases and capitalization is as per GAAP... but whatif COMPANY has a general practice of not capitalizing registration charges...
<hr height="1" noshade id="quote"></blockquote id="quote">

Dear, Standards overrule company's policy, if there is a contradiction in between company's policy and standards then obviously company's policy should suitably be amended to make it in line with the applicable standard.

Registration fees should be capitalized forth with the Vehicle.

israrhere · 02-10-2010, 06:24 PM

In addition to the above Ias 16 also states that initial costs to be capitalized
includes the costs which are necessary for its present location and condition.As registration charges are necessary b4 we can use the asset so it shall be capitalized and we cannot expense it.

Dard · 02-10-2010, 10:14 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Dard
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 As per IAS-16 your treatment is right. The cost of registration of vehicles is material in many cases. Beside it the capitalization of registration is as per GAAP.
<hr height="1" noshade id="quote"></blockquote id="quote">
Noor said the company does not capitalise the vehicle registration charges. So the treatment is not right
<hr height="1" noshade id="quote"></blockquote id="quote">

Dard you are new at this forum. Don't instruct me.
<hr height="1" noshade id="quote"></blockquote id="quote">
What has that to do with the answer? I am not instructing anyone

Dard · 02-10-2010, 10:21 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by noor4794
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Dard
 There are two criterias
for the capitalisation of assets and related costs
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably

As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised
<hr height="1" noshade id="quote"></blockquote id="quote">

How do vehicle registration charges meet with first criteria... How can you identify that economic benefits are flowing to entity....

Registration charges are assosiated costs, my main question is that whether these be included in COST of vehicle or treated as expense for the year... Hope you got my question..
<hr height="1" noshade id="quote"></blockquote id="quote">
If the vehicles are not registered, they can't be used further. Future Cash or cash equivalents will flow to the entity if the Vehicles(assets) are used. Therefore the cost of registration will NOT be expensed to the income statement. This is my view. Other PpL's view may differ

Ajnabi · 02-12-2010, 03:05 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Dard
 There are two criterias
for the capitalisation of assets and related costs
=> The economic benefits will into the entity by the use of the asset
=> The cost can be measured reliably

As per my knowledge, vehicle registration fulfills these two criterias and should therefore be capitalised
<hr height="1" noshade id="quote"></blockquote id="quote">

I have heard that "Criteria"(plural) or "Criterion"(singular) is a word, however, can not refrain myself to laugh after hearing a word "Criterias",[8D]

Dard · 02-12-2010, 04:08 PM

Mistake. I also couldn't help laughing when i saw you saying you are a qualified C.A and CMA or whatever. A so-called professional with such an illmanner. If professionals continue to be like this then this place will be nothing but a battlefield and full of chaos

Qureshi Muhammad Zeeshan · 03-01-2010, 11:22 PM

IAS-16 para 16(b)
"Any Cost Directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the management"

As Registration of vehicle is necessary by law for using the vehicle. therefore, with out registration vehicle is not in the condition to be used.
that's why it should be capitalized.