LC charges in relation to Asset purchased should be Capitalised ?
This query is : Resolved
Quick Summary
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 ?
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 ?
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.
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.
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.
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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