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Leased asset capitalisation
There are certain leased assets, for which some repair expenses has been incurred which is in the nature of adding more value to the asset.Since this asset has been leased , can these assets be capitalised or it should be treated only as expense.
Replies (1)
It Depends on whether the said leased asset are taken by the Lessee under Finance Lease of Operating Lease.
IF it is an Operating Lease
- Repair Expenses are minor then Charge to Statement of P&L.
- Repair Expenses are major and it does increase the performance of the asset beyond the standard performance of asset then verify whether in the lease agreement there is any provision for reimbursement of such expenses by the lessor if no such provision then charge it to P&L.
If it is Finance Lease
- Repair Exps are minor then Charge to P&L.
- Repair Exps are major and increases the performance then it should be capitalised.
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