Dear all,
I want to know the accounting of capital expenditure incurred by company but the assets not owned by company X.
Company X wants to extent its Power KV Lines for electricity, For that Sub station plant is to be created.
Now that substation plant is owned by company but for that plant some additionl KV lines to be put by electricity company and that expenditure is to be borne by company X.
Now wt should be the accounting for capital expenditure incurred on additional KV Lines of which Company has neither ownership nor control over it.Infact,they line may be used to provide electricity line to anyone in future i.e. handled by electricity board.
Options for Accounting Treatment,
1) Capitalise Substation plant and KV Line cost(Ref AS 10 to put asset in working condition i.e . to put substaion plant in working condition)
2) Write off as Rev Exp.
3) allocate cost of KV lines over assets made from substation plant.
3) Shown in SCH of FA as assets but as a note that asset not owned by company(Ref of guidance note on construction period )
Pl reply which option is best with reason.
CAclubindia
