08-31-2007, 04:38 PM
Dear Mr. Mahmood Ch.
Now Fifth schedule (revised) does not allow for or provide for deferring any pre-incorporation expenses as deferred cost.
You will have to draw up the profit and loss account of the private limited company referred by you and the loss will be taken to equity / balance sheet.
As far as matching principle is concerned, Mahmood Sahib, what would you opine about matching the cost with the benefits in this case. Would deferring such expenses and amortising them in three to five years would tentamount to appropriate compliance of matching principle. I think the benefit of incorporating a company and incurring incorporation expenses will go for all the life time of the company in perpetuity and cannot be consumed in (say) three or five years. However, this is a lengthy discussion. We have to do what legislature requires.
No deferred cost could be recognised in any unlisted compny or other concern which comes under the definition of medium size entity.
Hope to see your regular visits to the forum and to have your professional views on various matters raised herein by the members.
Best regards,
Kamran.
Now Fifth schedule (revised) does not allow for or provide for deferring any pre-incorporation expenses as deferred cost.
You will have to draw up the profit and loss account of the private limited company referred by you and the loss will be taken to equity / balance sheet.
As far as matching principle is concerned, Mahmood Sahib, what would you opine about matching the cost with the benefits in this case. Would deferring such expenses and amortising them in three to five years would tentamount to appropriate compliance of matching principle. I think the benefit of incorporating a company and incurring incorporation expenses will go for all the life time of the company in perpetuity and cannot be consumed in (say) three or five years. However, this is a lengthy discussion. We have to do what legislature requires.
No deferred cost could be recognised in any unlisted compny or other concern which comes under the definition of medium size entity.
Hope to see your regular visits to the forum and to have your professional views on various matters raised herein by the members.
Best regards,
Kamran.
