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Dear Sir,
If a company say, paid $150,000 insurance premium for a Construction Project, say coverage period from 1 Jan 2014 to 31 Dec 2017 plus 18 months maintenance period by insurer.
This company financial closing is year-end 31 Dec.
How should i apportion the prepayment insurance portion over the coverage period on Construction Project?
Should i include the maintenance period of 18 months for prepayment?Thanks
Try to separately analyse the insurance cover costs from the maintenance element.
Spread the insurance cover costs over the four years of the construction and, on completion of the project, start to expense the maintenance element.
In direct answer to your specific question, yes, treat the maintenance costs as a prepayment until the maintenance period begins
Ok?
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