Accounting/Depreciation

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This discussion addresses the accounting treatment for the construction of unipoles, where licence fees are paid for advertisement rights. The consensus is to capitalise the construction costs and charge depreciation over the asset's useful life. Initially, the tender was for 3 years, but with potential extensions, the recommended useful life for depreciation is 6 years.

CA Lalit Meena

CA Lalit Meena (Querist)

27 January 2022 We have received tender for construction of unipoles and thereafter advertisement rights will be awarded to us in consideration of licence fees.
My query is what would be the treatment of construction cost and if capitalised what would be the manner of charging depreciation.
Please guide...

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

27 January 2022 Capitalise and charge depreciation over life of the assets like 10 years.

CA Lalit Meena

CA Lalit Meena (Querist)

28 January 2022 Sir initially tender is for 3 years however it may be extended for further 3 years at the end of third year.
So what is the useful life should I take?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

28 January 2022 Take it as 6 years....

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