AS 10, demurrage charge

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Raj

Raj (Querist)
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16 August 2007 Whether can we capitalize demurrage charge to imported capital items ?

CA Mani

CA Mani (Expert)
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16 August 2007 Yes,

Cost incurred to bring the asset to present location includes Demurrage charges as it is incurred before bringing the asset to it's present location. i.e. factory.

Raj

Raj (Querist)
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16 August 2007 I am expecting more comments . pl

CA Manish Iyer

CA Manish Iyer (Expert)
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17 August 2007 As per para 20 of AS 10 states that the cost of a fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Demurrage charges are charges in the nature of delayed clearing charges which are charges to be incurred to bring the asset to its working condition for intended use.

It is a finance charge and should be expensed off immediately. No part of such charges should be capitalised.

I hope this would satisfy you.

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