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Capitalization of debonding charges

Krishna Rayabagakar (Manager Accounting) (34 Points)

22 March 2016

Can debonding charges paid in respect of asset moved from STPI unit to Non STPI unit from the seller co to purchasing company as a part of acquisition be capitalized? or expense off?

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2 Replies

Saliq Ansari (CA_Final Student) (885 Points)
Replied 22 March 2016

As per AS - 10 Accounting for Fixed Asset,

An Asset should be valued at its Historical Cost,

Historical Cost includes:

Purchase Cost
Non Refundable Taxes
All other Expenses directly attributable to bringing asset to its Present location & Condition.

Hence if the said debonding charges is such that

which can be ignored to bring asset to its present location or condition, then its should be charged to Revenue.
which is necessary to can't be ignored then it should be capitalised.

Krishna Rayabagakar (Manager Accounting) (34 Points)
Replied 23 March 2016

Thanks Ansari for your reply.

The debonding charges paid not at the time of original acquition but at the time of bringing the asset from selling company to purchasing company on account of acquisition of a business from purchasing company and the debonding charges paid were not part of purchase consideration.