04-19-2007, 01:48 AM
Kamran,
The capitalization policy of most Companies that I've seen almost always specificy a threshold. Whilst this threshold does not form the part of IAS-16, it is mostly endorsed by their auditors.
For a company having a balance sheet footing of say Rs. 10 million, a calculator worth Rs 500 is of little, if any, value. It would waste precios management time to seperately calculate the depreciation, gain/loss on disposal on a monthly basis, updating schedule for these nominal items, when this time could add greater value by tackling other more important tasks. Implenting controls over safeguarding of assets is vital for entities, but, it will be useless if the cost of implementing these controls exceed the benifits they serve. Further in the said case, the management of the entity was keeping a seperate record for such inventory for the purpose of safeguarding these assets.
I highly value your input on these professional issues, to be honest, I was also not satisfied with this prevailing practice by different entities initially, but after a careful thought and discussions with other professionals, I dont have any objections left on entities using such capitalization criteria.
Regards
The capitalization policy of most Companies that I've seen almost always specificy a threshold. Whilst this threshold does not form the part of IAS-16, it is mostly endorsed by their auditors.
For a company having a balance sheet footing of say Rs. 10 million, a calculator worth Rs 500 is of little, if any, value. It would waste precios management time to seperately calculate the depreciation, gain/loss on disposal on a monthly basis, updating schedule for these nominal items, when this time could add greater value by tackling other more important tasks. Implenting controls over safeguarding of assets is vital for entities, but, it will be useless if the cost of implementing these controls exceed the benifits they serve. Further in the said case, the management of the entity was keeping a seperate record for such inventory for the purpose of safeguarding these assets.
I highly value your input on these professional issues, to be honest, I was also not satisfied with this prevailing practice by different entities initially, but after a careful thought and discussions with other professionals, I dont have any objections left on entities using such capitalization criteria.
Regards
