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Compensation against fixed assets, inventory

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(Querist)
27 June 2008 The Company has received Rs. 20 crore against fixed asset as Rs. 10 crore, Rs. 5 crore against the inventory and 5 crore against operating expenses. The Compensation was paid against non perfromance of certain activities for which the above assets we purchased and expenses were incured. The assets and inventory and assets is still with the company and the compensation doesnot include the transfer of the assets.The agreement is the compensation agreement and the company has not to pay any of the amount again in the future.

Please guide on the issue of accounting treatment of the same asap. Please guide me even to any guidance from ICAI regaridng the same
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Amit Bajaj

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Amit Bajaj (Expert)
27 June 2008 Your query is not very clear please elobrate on the query as to what is the agreement, whether company has to pay these amounts back?

Essentially please elobrate on the transaction.
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akshay

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akshay (Querist)
27 June 2008 The Company has received Rs. 20 crore against fixed asset as Rs. 10 crore, Rs. 5 crore against the inventory and 5 crore against operating expenses. The Compensation was paid against non perfromance of certain activities for which the above assets we purchased and expenses were incured. The assets and inventory and assets is still with the company and the compensation doesnot include the transfer of the assets.The agreement is the compensation agreement and the company has not to pay any of the amount again in the future.

Please guide on the issue of accounting treatment of the same asap. Please guide me even to any guidance from ICAI regaridng the same
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Amit Bajaj

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Amit Bajaj (Expert)
27 June 2008 still not clear, can u call me.. @ 9849662616
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S.Srinivasaraghavan

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S.Srinivasaraghavan (Expert)
27 June 2008 Will the assets get impaired if the intended activities are not performed?

Assuming that the compensation received is to compensate failure of performance by the party paying the compensation, amount received against operating expense will be set off against the receipt thereagainst.
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