Lease hold land amortization
can yu please substantiate it and provide reasoning behind it?
Depreciation obviously cant be claimed as it s not covered by AS 10.
if there is no reasonable certainty that the company would obtain ownership of the leasehold building by the end of the lease term,the leasehold building should be fully depreciated
over the lease term or the useful life of such building,whichever is shorter
Taking reference from US GAAP, leasehold land is considered as prepayment and is amortised like a prepaid expense.
However under IFRS implementtaion and under Indian GAAP, we go with the substance rather than form.
Since Land has unlimited life, it can never be considered as finance lease. Hence if an entity has secured a long term lease of land, it is considered as a capital outflow whose benefit is going to be accrued over the period. Since it cannot be considered as finace lease, entity park the leasehold land in Fixed Asset Schedule and amortise it over the lease term.
If the lease rights are freely transferable and satisfy the criterion of AS 26 - Intangible assets, they should be classified as Intangibles and amortised over its useful life.