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Accounting of proceed from performance bank guarantee

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Querist : Anonymous

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Querist : Anonymous (Querist)
23 August 2011 We have capitalized the amount paid under EPC contract with relation to fixed asset. The EPC contractor had extended performance bank guarantee for the performance of the above mentioned asset. on account of poor perfomance we have invoked the performance bank gaurantee & received the bank guarntee amount. In this context would like to know :
1.What is the correct way of accounting the proceed of bank gurantee ? Should it be accounted as Miscellaneous Income or it should be netted off against the value capitalized?
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CMA Ramesh Krishnan

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CMA Ramesh Krishnan (Expert)
23 August 2011 My view, Since the bank guarantee invoked against the performance so it need to be set off against the fixed asset value
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CS Bijoy

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CS Bijoy (Expert)
24 August 2011 agreed with expert..
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