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Capitalize or Not???

amitmehta_ca (CA, CMA) (99 Points)

08 June 2011

PLEASE HELP ME ON THE BELOW GIVEN FACTS

WHETHER WE SHOULD CAPITALISE THE RUBBER MAT BEING LAID OVER THE FLOOR OF THE OFFICE? THAT IS BEING LAID WITH A SOLUTION WHICH MAKE IT FIXED.

CONTRACTOR CHARGES1.05 LACS FOR THE SAME?

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16 Replies

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 08 June 2011

yes it should be capitalized and tds should also be deducted on contract payment

2 Like

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 08 June 2011

Originally posted by : future ca
	yes it should be capitalized and tds should also be deducted on contract payment

AGREED.

(Guest)

Originally posted by : future ca
	yes it should be capitalized and tds should also be deducted on contract payment

future ca is right

Prasad (Sr. Manager) (617 Points)
Replied 08 June 2011

yes you need to capitalise and also deduct TDS on vendor payment

(Guest)

yes agree with all above experts

Malika Sharma (student) (133 Points)
Replied 09 June 2011

yes it should be capitalize because its like capital expenditure which has increases the life in this case of floor...hence it sould be capitalize..

CA Hemang Shah (PRACTICE) (658 Points)
Replied 09 June 2011

Amount itself seen that exps should be capitalized

CA lakshmikanth (Chartered Accountant) (238 Points)
Replied 09 June 2011

Strictly speaking it is not capitalised as per AS-6 and Guidence notes

1.Just for fixing the rubber MAT not increseing the life total building even though increseing the life of floor

2.Once building is capitalised after that any expenditure incurred it is charged to revenue except major modification And expansion so just like fixing the rubber mat it is not considered major modification

3 we know materiality concept so quantum of value is not considered nature of expenditure is considered

1 Like

CA Mohit Saxena (FINANCE MANAGER) (343 Points)
Replied 09 June 2011

Originally posted by : lakshmikanth
	Strictly speaking it is not capitalised as per AS-6 and Guidence notes 1.Just for fixing the rubber MAT not increseing the life total building even though increseing the life of floor 2.Once building is capitalised after that any expenditure incurred it is charged to revenue except major modification And expansion so just like fixing the rubber mat it is not considered major modification 3 we know materiality concept so quantum of value is not considered nature of expenditure is considered

Agreed.

It is a revenue expenditure and should be charged to "Reapair & Maintenance Head"

CA Mohit Saxena (FINANCE MANAGER) (343 Points)
Replied 09 June 2011

Originally posted by : Malika Sharma
	yes it should be capitalize because its like capital expenditure which has increases the life in this case of floor...hence it sould be capitalize..

Malika in that case if we use Special kind of paint and company said it increase the life of the walls, then as an auditor what you will do?

The thing which we have to consider is "Substantial Change in the life of the asset".

Malika Sharma (student) (133 Points)
Replied 09 June 2011

if that paint increases the life of the wall in terms of patches etct hen we capitalize it .but since its not major modification then we charged it to revenue expenditure? Does it mean this? substantial changes ?

Azim Khan ACA,CS,CMA*,LLB* (Proprietor) (1312 Points)
Replied 09 June 2011

i agree with lakhsmi kaanth.

capitalisation is done when the life of the asset is increased than that of a previously assessed standards. had this not been done, had the building become obsolence? ofcourse, the answere is No.. on the other hand, if we do this, does the life of the building increases than the previously assessed standrds??

in the give case, making it permanently fixed with a solution and the amount incurred is immaterial for the purpose of capitalisation. hence, in my opinion it should not be capitalised..

1 Like