Should removal of old machinery to install new one is capita

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Divya Agarwal (Querist)
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29 April 2014 Dear Experts,

Since a new machine is to be installed in a company a construction company is hired to do the work it charges 16,00,000 for removal & installation of machine so the company which has installed the machine is capitalizing the whole amount as invoice raised by construction company doesn't bifurcate the removal of old & installation.

IS company is doing correct thing as per AS-10

please reply ASAP

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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29 April 2014 As per the AS-10 fixed assets value included Purchase price, non refundable duties and any other costs which is directly attributable for bringing asset to the working condition. like site preparation, delivery cost, installation cost.

but removing existing machinery to install the new machinery no directly attributable to form part of fixed cost. so it may not be cost of fixed asset as per AS-10.

Company has to get the Invoice for the machinery installation separately

Divya Agarwal

Divya Agarwal (Querist)
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30 April 2014 It is very helpful,thanks for your reply

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