Deferred expenditure

Question

If I make payments on a fully managed service contract now but the assets and associated contract doesn't go live for 2 years, can i treat the expenditure for yers 1&2 as deferred expenditure and spread it over the life of the remaining life of the contract once the asset comes into use?

Comments

The economic life of expenditures manages the treatment of expenditures as capital nature or revenue nature. Over 12 months expenditures becomes capital nature. In 2 years of your assets life, if tangible, would be depreciated as capital assets in 2 years, and is shown as fixed tangible assets in your balance sheet. or if the assets is intangible then would be deferred expenses and not fixed assets. The expenditures deferred over its useful life of 2 years will be amortized in 2 years, and will be treated intangibles in the balance sheet as deferred cost or expenditures. Tangibility or intangibility gives as sunk cost that is un-recoverable, but if it is tangible, and contract is repudiated, the tangible assets in the mid of useful life can be disposed off in the open market. Intangible assets cannot be fetched into the market.

Answer 1

yes you can do this as the benefits that you would gain from this exceeds more than 1 year, so you can deferred this