Whether a lumpsum payment of lease rent to acquire leasehold land for certain period is compulsorily to be capitalised in books? Is there any legal requuirement to capitalise the leasehold land as FA?
or alternatively,
Company can book the advance lease rent as prepaid expenses and yearly amortise the same?
03 January 2011
A land is always an operating lease unless the title to it is transfered to the lessee at the end of the lease term. As i recollect there will be rarely cases in India where land is transfered to the lessee at the end of the lease term.
Subject to the above please treat it as an operating lease and transfer the same to lease rent advance account..bifurcation may be required for current and non current portions. Other accounting is similar like amortising over the term of the lease.
CAclubindia
