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CMA Intermediate · Corporate Accounting and Auditing · Underwriting of Securities

Under Ind AS and Schedule III practice, how is underwriting commission paid on an issue of equity shares ordinarily treated in the company's books?

Underwriting commission on a share issue is treated as a cost of the equity transaction and is adjusted against the securities premium account as permitted by the Companies Act, rather than being carried forward as an asset or capitalised into property, plant and equipment.

  1. AAdjusted against securities premium, to the extent available, as a share issue costCorrect
  2. BShown as an asset under miscellaneous expenditure to be written off
  3. CDebited to the statement of profit and loss only
  4. DCapitalised as part of property, plant and equipment

Explanation

Share issue costs, including underwriting commission, are a cost of an equity transaction and are deducted from equity, normally charged to the securities premium account under section 52. Showing it as a deferred asset is not permitted now, and it is not part of PPE cost.

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