Had a query in regards to Capitilisation..
Say XYZ entity has a multi storey building under construction. The entire amount is appearing in CWIP in the books. The entity has let out a small part of the building to a third party, hence rental income is appearing.
Now what should be the appropriate treatment for the CWIP and the rental income??
Balance of CWIP will be debited to stock in trade.
Rental income is assessed under IFHP.
1. As per As 10, property, plant and equipment are tangible items held for use in producing goods, providing services, rental to others, for administrative purpose.
once asset is ready to use for intended purpose, to that extent we need to transfer to Buildings A/c, should not be shown under capital working progress.
In your case portion of construction ready to occupy. so we can transfer to Buildings A/c.
2. then rental income to be recognised as revenue from that asset.
CAclubindia
