ACCOUNTING FOR FIXED ASSETS (AS-10)1. Fixed assets shall be shown in financial statements at historical cost less depreciation.2. What is Historical cost: The historical cost consists of the following:
a. Purchase price.
b. Import duties and other non-refundable taxes.
c. Cost of bringing the asset to the working condition like: Site preparation, Delivery cost, Installation cost, Expenditure incurred on test runs less income by sale of products, Administrative overheads specifically attributable for construction/ acquisition/installation.
d. Reduce Govt. grants received/receivable against fixed assets. e. Price adjustments, changes in duties etc.3. Self - Constructed Assets: Cost of self-constructed assets shall not include any internal profit.4. Accounting treatment of first time Revaluation:
a. Upward: Increase in net book value is credited to „Revaluation Reserve?.
b. Downward: Decrease in net book value is charged to the profit & loss account.6. Valuation of fixed assets in special cases:
a. Assets acquired on hire purchase terms: Such assets are recorded at their cash price.
Further, Shown in Balance Sheet - indicating full ownership does not exist.
b. Cost of jointly held assets: The original cost, accumulated depreciation, and written down value should be stated in the b/s in the proportion of entities ownership.
c. Fixed assets acquired at consolidated price: Cost of each fixed asset should be determined on a fair basis as per valuation by competent valuer?s.
d. Cost of assets acquired in exchange of assets: Assets acquired should be recorded either at fair market value of asset given up or book value of asset given up, which ever is lower. ADD/LESS: Any additional payment or receipt.
e. Fixed Assets acquired in exchange of shares or other securities: When payment of fixed assets is made in shares or securities, assets should be recorded either at Fair market value of asset acquired or Fair market value of shares or securities issued, whichever is clearer. 7. Goodwill: Is recorded
a. Only when consideration is paid, or when excess is paid over net assets acquired. b. Is written-off over a period as a matter of financial prudence.8. Patents:
a. On purchase, recorded at - At Purchase price, Incidental expenses, Stamp cost, etc. b. On in house development, recorded at - All Related expenses.
c. Written - off over their legal life or useful life whichever is less.9. Known-how:
g. On purchase, recorded at - At Purchase price, Incidental expenses, Stamp cost, etc. h. On in house development, recorded at - All Related expenses
i. To be written off:
i. Relating to manufacturing process - in the year in which it is incurred.
ii. Relating to Plans, designs & drawings of buildings or plant & machinery - To be capitalised & depreciated.
Note: Composite payments (manufacturing process & plans, designs etc.) are to be apportioned.10.Addition or extension to an existing asset:
a. If integral part of existing asset: Added to gross book value of existing assets.
b. If having separate identity and capable to be used after the disposal of existing asset - it is accounted for separately.
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