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Capitalization of fixed asset


07 February 2013 Dear sir,

An amount of Rs.46 crores has been spent for constructing 220KV sub station and subsequently transferred to Govt Electricity board because our company is not eligible to maintain that sub station as per Govt rules. Our company is the only consumer of power from the above sub station.

Now what is the treatment to be given for this Rs.46 crores in financial accounts?

13 February 2013 The expenditiure is capital expenditure.

If the Company receives the benefit of the 220KV line, then it can still capitalise the expenditire over the expected contract for using the transmission line.

It is fair common in many industries that Corporates incur capital cost but may not be allowed to register in its own name. Example would be laying down of approach roads in plant and vicinity.

A suitable disclosure will have to be given in notes.

15 February 2013 Thanks sir.




15 February 2013 Dear sir,

Can u give me some example cases?



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