Capitalization of asset

AS 1125 views 3 replies

CMA.srinivasa reddy

Job

206 Points Joined August 2010

Hi Friends,

Our company is Constructing new plant, and the company is purchasing Machinery & Other Equipments which is part of the Construction. Ex: A big Crane Purchased & Installed to New Plant which is going to Capitalize on April-2015,on the same day the plant will start production. For this Crane we received the bill, Here my doubt is whther I should capitalize the Crane as on Bill date or I should keep in Capital work in Progress. The new crane is attaching to the new Plant & not seperatable.

We are capitalising Other Machineries which are used for Production as on bill date, Regarding Crane whether it is part of Civil Work or not..when should capitalise? Expecting Reply soon.

Thanks in Advance.

Replies (3)

CA ANKUSH AGGARWAL

CHARTERED ACCOUNTANT

2782 Points Joined July 2009

Capital Work in progress..Since Crane is not separable from other plant and machinery and it shall be capitalised with whole plant project it would be incorrect to capitalise the crane now.Keep it under CWIP and capitalise it as Plant and machinery at the time of Plant capitalisation

rohit

Student CA Final

117 Points Joined September 2012

i do agree with ankush

capital expenditure incurred before assets ready for put to use, shall be CWIP

CMA.srinivasa reddy

Job

206 Points Joined August 2010

Thanks for Reply..

Relating to the Same plant Company purchasing New machinery which can be used for Production on which we alrady paid Entry tax..Suggest me the date when it should capitalise...The purchased machinery will use for production only when the plant is Capitalised..

Thank you