capitalisation of plant and machineries
This query is : Resolved
Sunil Kumar
(Querist)
11 May 2009
as I am working in in a pharma industry and and we are at stage of capitalisation . what is the procedure ,methods and steps to capitalise the machineries and we have started production in august 2008 . please help me out .
Parveen Bansal
(Expert)
11 May 2009
1. Identify the following:
a. Date of commercial production, which will be the cut off date for capitalisation of expenses.
2. List of assets. Component accounting is permitted as one of the method for capitalisation under Indian GAAP and IFRS will be applictable from 2011, it is advisable to follow component accounting.
3. Capitalise direct costs like purchase cost, frieght, loading / unloading etc.associated with the same.
3. Allocate common costs like borrowing costs etc.
Good luck
a. Date of commercial production, which will be the cut off date for capitalisation of expenses.
2. List of assets. Component accounting is permitted as one of the method for capitalisation under Indian GAAP and IFRS will be applictable from 2011, it is advisable to follow component accounting.
3. Capitalise direct costs like purchase cost, frieght, loading / unloading etc.associated with the same.
3. Allocate common costs like borrowing costs etc.
Good luck
taxindiaconnect
(Expert)
11 May 2009
This is an answered query as following -
As per AS - 10 on fixed assets accounting any cost which is incurred to bring the machinery or any capital assets to a working conditions, should form part of the plant and machinery or capital assets. Accordingly the all expenditure whether foundations freight, salaries, travel expenditure labour charges technical fees etc. paid to bring the machine / capital asset in working condition forms part of the plant and machinery / capital asset eligible for deprecation at the rate applicable to plant and machinery as per Companies Act. This applies the Income tax act depreciation as well. So find out all the expenditure incurred connected directly to being the capital assets in to existence / working condition and capitalise the same capital assets. The entries have been well explained by Prakash. Please note that any CENVAT claimed against the plant and machinery needs to be reduced from the cost or any subsidy received should also be reduced from the cost of the asset
As per AS - 10 on fixed assets accounting any cost which is incurred to bring the machinery or any capital assets to a working conditions, should form part of the plant and machinery or capital assets. Accordingly the all expenditure whether foundations freight, salaries, travel expenditure labour charges technical fees etc. paid to bring the machine / capital asset in working condition forms part of the plant and machinery / capital asset eligible for deprecation at the rate applicable to plant and machinery as per Companies Act. This applies the Income tax act depreciation as well. So find out all the expenditure incurred connected directly to being the capital assets in to existence / working condition and capitalise the same capital assets. The entries have been well explained by Prakash. Please note that any CENVAT claimed against the plant and machinery needs to be reduced from the cost or any subsidy received should also be reduced from the cost of the asset
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