Treatment of one time payment
This query is : Resolved
CA Chinmayee Dwibedi
(Querist)
19 November 2015
Please help me in this regard;
One company have to pay an one time payment of 25 cr to govt for using river water and it is to be paid in 5 installments,there is no specific time period for using the water after payment of that amount to govt.Then what will be its treatment in companys books of account. That amount will be paid from this f.y.
One company have to pay an one time payment of 25 cr to govt for using river water and it is to be paid in 5 installments,there is no specific time period for using the water after payment of that amount to govt.Then what will be its treatment in companys books of account. That amount will be paid from this f.y.
CA R SEETHARAMAN
(Expert)
19 November 2015
Charge it over the life of the project. In case of power generating project the life is 25 years so it can be charged over a period of 25 years.
CA Chinmayee Dwibedi
(Querist)
19 November 2015
Thank you..but please say me the journal entries if the payment is made in 5 installments and also entry relating to its writting off
CA R SEETHARAMAN
(Expert)
19 November 2015
Capitalize as intangible asset River water usage rights and amortize it over the life. Refer AS 26 in this regard.
CA Chinmayee Dwibedi
(Querist)
19 November 2015
Yes thank you so much
CA Chinmayee Dwibedi
(Querist)
20 November 2015
Please provide me a case study in which company this same thing has happened.
CA R SEETHARAMAN
(Expert)
21 November 2015
I have not come across any case study on the same thing it is only applying accounting standards for a particular situation. For our power generating company only free water is provided from Indra Gandhi canal.
CA Chinmayee Dwibedi
(Querist)
21 November 2015
its ok then
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