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Hello, please how do IFRS recommend that pre-operation and incorporation exp be treated and what IFRS are relevant here?

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January 6th 2015 AN ACCA USER 140 Points

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Here the question has arised whether to capitalize the pre-operation expenditure as Intangible assets ( IAS 38) or charge it to P & L. When going through the IAS 38, paragraph 69 states examples of the types of cost that are indistinguishable from the costs of developing the business as a whole and that should, therefore, be EXPENSED when it is incurred. The kind of such costs are include :

01.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 IAS 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);

02.expenditure on training activities;

03.expenditure on advertising and promotional activities (including mail order catalogues);

04.expenditure on relocating or reorganizing part or all of an entity.

From the above explanations, it is clear that PRE-OPERATIONAL COST has to be EXPENSED as incurred

January 11th 2015 AN ACCA USER 440 Points
Edited January 11th 2015 AN ACCA USER
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