LC charges in relation to Asset purchased should be Capitalised ?

This query is : Resolved

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LC charges for machinery not yet received are capitalized as directly attributable costs under Ind AS 16. They should be shown with capital advances under Other Non-Current Assets, not CWIP, and later moved to CWIP when the asset is received.

Challa.Praveen kumar

Challa.Praveen kumar (Querist)
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23 April 2026 Hi,
For the purchase of Machinery, we have paid
* 30% paid as advance to vendor
* 70% through LC, and bank has charged LC charges
As on 31-Mar-26, machinery is not yet received.

We are showing vendor advance under Capital Advances (Non-current assets). But my query is on LC Charges (It should be Capitalised). Should it be shown under CWIP or under any other Group in IND AS FS ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 April 2026 Under Ind AS, LC charges related to the purchase of machinery that has not yet been received should typically be shown under Other Non-Current Assets (as part of Capital Advances) rather than Capital Work-in-Progress (CWIP).
Under Ind AS 16 (Property, Plant, and Equipment), the cost of an item of PPE includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating. LC charges are directly attributable costs.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 April 2026 Since the machinery is not yet received as of March 31, 2026:
Group: Other Non-Current Assets
Sub-head: Capital Advances
Treatment: Add the LC charges to the amount already shown as Capital Advance (the 30% advance). Once the machinery is received and construction/installation begins, the total accumulated amount (Advance + LC Charges) will be transferred to CWIP.

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