Capital WIP

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This query is : Resolved

Vinay Chopra (Querist)

02 July 2010 Hi, Pls Help

1. Whether Capital Advances are part of Capital WIP.??

2. A company in construction period capitalised leasehold land as fixed asset. The yearly amortisation is being added with capital wip? Is it correct??

3. Financing charges paid to bank on 24.03.10 has been added with Capital wip. But, my query is as per AS16 commencement of borrowing cost shall be when:
a) Expenditure for acquistion etc has been incurred.
b) borrowing cost has been incurred.
c) construction activities are in progress.

Does the condition (a) is satisfied if the company has not received the borrowed money.

Thanks in advance

CA SMR

CA SMR (Expert)

08 July 2010 In my opinion,

1. Capital Advance is not part of Capital WIP
2.The yearly amortisation of leasehold land should be shown as capital WIP.I have referred to the following excerpt from AS 10 to come to this conclusion.
9.3 Administration and other general overhead expenses are usually excluded from the cost of fixed assets because they do not relate to a specific fixed asset. However, in some circumstances, such expenses as are specifically attributable to construction of a project or to the acquisition of a fixed asset or bringing it to its working condition, may be included as part of the cost of the construction project or as a part of the cost of the fixed asset.