One of old office structure was demolished by person. However to dimolish that building, he had to pay good amount of money as he had to take help of one building contractor. Against this, very minor amount is received as a scrape as office was old. How can I treat this some pay to dimolish building ?
I can't reduce this amount paid from block of assets as no money is received by client. He has actually paid money.
If I debit it to P&L then it will result into double benifit. One is of depreciation & other is as a expense in P&L .
I also can't capitalised as assets as nothing is created actually.
Can you please guide what to do with demolition cost paid by client ?
Since this building seems to be very old according to you, I presume, it did not include the costs of dismantling in the cost of asset at initial recognition.
You are still charging depreciation.
You did not pay the money for demolition. The client did.
You did not receive any large amount apart from the scrap value.
This means, all you have to do is report gain or loss on disposal of non current asset in income statement and derecognise the asset in your balance sheet.
Finally, the you should understand, building disposal is recorded at “lower of carrying amount or FVLCD”. Here FVLCD will include demolition charges.
(Please let me know if you have included dismantling costs included in building at inception)
CAclubindia
