Accounting For Fixed Assets (As-10)

ACCOUNTING FOR FIXED ASSETS (AS-10)
PRESENTATION BY MANSI VAIDEHI KENA JALAJ BHAVYESHA DHAVAL
L.J INSTITUTE OF MANAGEMENT STUDIES AHMEDABAD GUJARAT

Fixed Assets:
Fixed asset is an asset held with the intention of
being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business. Examples:Land Building Plant and Machinery Furniture etc.

Applicability:-
This accounting standard is not applicable for the

following items:Forests, Plantations, and similar regenerative resources. Wasting assets like minerals , oil, and natural gas. Expenditure on real estate development. Live stock.

Fixed assets in financial statement: Fixed assets shall be shown in financial statement by
two ways:Historical Cost II. Revalued Price

I.

Historical Cost:
The historical cost of acquired fixed assets consists of
the following Purchase price Import duties and other non-refundable taxes Any directly attributable cost of bringing the asset to the working condition for its intended use like:site preparation , delivery and handling cost , professional fees etc.

Historical Cost of self constructed fixed
assets: Such fixed assets which were constructed by inhouse efforts are called as self constructed fixed assets. All costs which are directly related to the specific asset. All costs that are attributable to the construction activity should be allocated to the specific assets. Any internal profit included in the cost should be eliminated.

Cost of assets acquired in exchange of existing assets Fixed assets exchanged not similar: Assets acquired should be recorded either at fair market
value of assets given or assets acquired. Fixed assets exchanged are similar: Fixed assets acquired is recorded at fair market value of assets given up or fair market value of assets acquired or net book value of assets given up. Fixed assets acquired in exchanged of share or other securities: Assets should be recorded at either fair market value of assets purchased or Fair market value of share of securities whichever is clearly available.

Revalued Price: When a fixed asset is revalued, an entire class of assets should be revalued or the selection of assets for revaluation should be made on a systematic basis. There are two methods of showing the
revalued amount in the financial statement.
By re-stating the gross book value and accumulated
depreciation. By re-stating net book value adding there in the net increase on account of revaluation. Revaluation of fixed assets should be restricted to the net recoverable amount of fixed assets.

Accounting treatment of revaluation:
First time revaluation(upward):
Increase in net book value is credited to owners interest
under the head Revaluation Reserve. First time revaluation(Downward): Decrease in net book value is charged to the profit & loss account.

Accounting treatment of revaluation:
First Revaluation (downward) Subsequent revaluation
(upward): Decrease in net book value is charged to the profit & loss account in the year in which downward revaluation was done. Balance amount should be credited to revaluation reserve. First Revaluation (upward) Subsequent revaluation (downward): Increase in net book value is credited to owners interest under the head Revaluation Reserve. The balance amount of devaluation is charged to profit and loss account.

Valuation of fixed assets in special cases: Assets acquired on higher purchase terms: Such assets are recorded at their cash price. Cost of jointly held assets: Either the original cost, accumulated depreciation and written down value should be stated in the balance sheet Or Pro rata cost of such jointly owned assets is grouped together with similar fully owned assets. Fixed assets acquired at consolidated price: Cost of each fixed asset should be determined on a fair basis as per valuation by competent valuers.

Improvements and Repair: There are two accounting treatments of cost of improvement and repairs. After the improvements and repairs, expected future benefits from fixed assets do not change. The expense of improvement and repairs are charged to the profit and loss account. After the improvements and repairs, expected future benefits from fixed assets will increase beyond the previously assessed standard performance. These expenses are included in the gross value of fixed asset.

Addition of capital nature to an existing asset
If integral part of existing asset- it is generally
added to gross book value of existing assets.

If separate identity and capable to be used after the
disposal of existing asset-it is accounted for separately. Retirement and disposal: Fixed assets are deleted from the financial statement either on disposal or on expected economic benefit is over. Gains and benefits arising are recognized in profit and loss account.

Fixed assets are retired from active use and held for
disposal. Such asset is stated at the lower of net book value and net realizable value in financial statement.
Any expected loss is recognized immediately in the profit and
loss account. It should be separately shown in balance sheet. Disposal of previously revalued fixed assets. If there is profit, then it is credited to profit and loss account. If there is loss then it can be adjusted against the balance of revaluation reserve.

Disclosure: Gross and net book values of fixed assets at the beginning
and at the end of accounting period showing, disposal, acquisition and other movements.
Expenditure incurred on account of fixed assets in the course of
construction or acquisition. Revalued amount substituted for historical cost of fixed assets, the method adopted to compute the revalued amount, and whether an external valuer has valued the fixed assets, in case where fixed external has valued amount. If there is loss then it can be adjusted against the balance of revaluation reserve.

Capitalization of exchange differences
incurred on fixed assets related borrowing Instructions contain in part I of schedule VI of the companies act, 1956 regarding adjustment of exchange difference in the carrying amount of the fixed assets due to change in the rate of exchange of fixed assets linked liability denominated in foreign exchange of fixed assets linked liability denominated in foreign exchange has been superseded by issue of companies.

Bibliography: STUDENTS GUIDE TO ACCOUNTING
STANDARDS by D.S.Rawat. (18th Addition)

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ACCOUNTING FOR FIXED ASSETS (AS-10)

PRESENTATION BY MANSI VAIDEHI KENA JALAJ BHAVYESHA DHAVAL

L.J INSTITUTE OF MANAGEMENT STUDIES AHMEDABAD GUJARAT