VALUATION OF LEASE LAND

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DINESH K SHAH (Querist)
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08 September 2009 WE HAVE A LEASE LAND AND THE SAME LAND IS VALUED AT BY THE CONSULTANT. VALUATION AMOUNT IS CREDITED AS CAPITAL RESERVE IN THE BALANCE SHEET. WALL IS CONSTRUCTED ON THE LAND.

VALUATION IS BASED ON THE RENTAL INCOME OF THE LAND.

AMOUNT CREDITED TO CAPITAL RESERVE IS CORRECT OR NOT?

LEASE IS FOR 30 YEARS

Kaustuv

Kaustuv (Expert)
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09 September 2009 if it meets the criteria of finance lease you have recognise both asset and liability.Credit to capital reserve- why would you do that? I did not understand.

DINESH K SHAH

DINESH K SHAH (Querist)
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10 September 2009 GOOD AFTERNOON KAUSTUV. FOR INCREASING THE ASSET VALUE IN BALANCE SHEET. VALUATION BASED ON THE CONSTRUCTION OF BUILDING ON THE SAME LAND RECEIVED FROM THE CONSULTANT ON THE BASIS OF THE PERIOD - RENT INCOME BASIS. THE LAND IS ON THE MAIN AREA AND HAVING THE VALUE FOR LEASE SALE. NOW ONLY COMPOUND WALL IS MADE.

Kaustuv

Kaustuv (Expert)
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10 September 2009 I could not understand your query fully. Please elaborate a bit more. But for incresing asset value, why would credit capital reserve. I am supposing the lease in question meets all the conditions of getting recognised as a finance lease. Then, you have to recognise an finance lease asset and finance lease liability as per the requirements of AS-19. Please tell me if you require guidance in application of AS-19

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