As - 16

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Querist : Anonymous

Querist : Anonymous (Querist)

10 August 2013 What is the meaning of Imputed cost of Owner's equity?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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11 August 2013 Imputed Cost means notional cost or implied cost. Owner's Equity also have some implied cost. As per AS 16- only explicit costs are considered.
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Suppose I buy a Machine. I pay 6.00 lac from my Bank A/c. I take Loan of 4.00 lac @ 12% p.a.
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You can say that I am incurring an annual imputed cost expenditure of Rs. 72000/-, though I have not to pay anybody.
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Querist : Anonymous

Querist : Anonymous (Querist)

12 August 2013 Thank You Sir,
Sir by your answer can I come to the following conclusion :
If the co purchases fixed assets by raising preference shareholders and if the fixed asset is qualifying asset in the words of AS -16, then the interest paid to preference shareholders for the period till the fixed assets becomes usable should not be capitalized.
Am I correct Sir?
Please do correct me in this regard, if I am wrong.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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12 August 2013 The preference share holders are paid dividend and not interest.
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Dividend distribution is appropriation out of profits.
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So, It is correct if you do not capitalise such amount.
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Querist : Anonymous

Querist : Anonymous (Querist)

14 August 2013 Thank you very much for your answer sir.
It is actually very helpful for me in many ways.
Thank you again.

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