treatment
This query is : Open
12 May 2010
whether overhauling of existing plant and machinery is a revenue,capital or deferred revenue expenditure??
and what if due to such overhauling expected life increases by 6 years??
and what if due to such overhauling expected life increases by 6 years??
12 May 2010
As per AS - 10
Improvements and Repairs
12.1 Frequently, it is difficult to determine whether subsequent expenditure related to fixed asset represents improvements that ought to be added to the gross book value or repairs that ought to be charged to the profit and loss statement. Only expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is included in the gross book value, e.g., an increase in capacity.
12.2 The cost of an addition or extension to an existing asset which is of a capital nature and which becomes an integral part of the existing asset is usually added to its gross book value. Any addition or extension, which has a separate identity and is capable of being used after the existing asset is disposed of, is accounted for separately.
Since the expenditure increases the future benefits from the existing asset beyond its previously assessed standard of performance it should be included in the gross book value
Improvements and Repairs
12.1 Frequently, it is difficult to determine whether subsequent expenditure related to fixed asset represents improvements that ought to be added to the gross book value or repairs that ought to be charged to the profit and loss statement. Only expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is included in the gross book value, e.g., an increase in capacity.
12.2 The cost of an addition or extension to an existing asset which is of a capital nature and which becomes an integral part of the existing asset is usually added to its gross book value. Any addition or extension, which has a separate identity and is capable of being used after the existing asset is disposed of, is accounted for separately.
Since the expenditure increases the future benefits from the existing asset beyond its previously assessed standard of performance it should be included in the gross book value
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12 May 2010
thanks
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