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UPS battery capitalisation

Rohit (student) (53 Points)

23 July 2016

whether ups battery to be capitalised or not. please guide.

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CA Kishore D (Management Consultant | Trainer) (324 Points)
Replied 23 July 2016

Hi Rohit,

Replacement of a battery does not 'increase' the useful life of the asset, it just maintains the existing useful life. Therefore this is not regarded as capital expenditure, and hence cannot be capitalized as a part of the asset. This is the treatment under existing AS 10.

Under Ind-AS 16 however, component approach is applicable. Therefore, the entire UPS would have been broken down into components and capitalized. In that case, the battery is recognized as a separate asset by itself, and hence replacement of the battery can be accounted as a separate fixed asset.

Hope this helps.

Rohit (student) (53 Points)
Replied 23 July 2016

Thank u very much sir for your reply. For F.Y 2015-16 Ind As 16 won't be applicable if I m correct. So I should treat it as per AS 10. Am I Right.?

CA Kishore D (Management Consultant | Trainer) (324 Points)
Replied 23 July 2016

For FY 2015-16, it is not applicable per-se. However, if the company is falling under the applicability criteria for 2016-17, then the previous year's figures need to be restated. But that is not something you need to worry about now.

For now its just AS 10.