We have placed one import PO.
There is a loss of roll life due to minor mistake in dimension. But usable with a lower economic life
The shipper wants to compensate importer by 1% cut in price
This being a Capex item-whether compensation to be treated as Revenue or a reduction in capitalisation value.
What Accounting Standard states-please guide.
Thanks in advance
The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. So cost - discount in price = capitalised value.
Next, because we have paid upfront the cost of machinery without discount, credit 1% to profit and loss as discount received.
Finally, if you did not pay for the machinery yet, make an error entry and reduce 1% from creditors account.
As 10 standard covers this. getdocument (mca.gov.in)
AS 10, para 9.1
"The cost of a fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments, changes in duties or similar factors."
This could be a price adjustment, which will lead to a reduction in capitalised value.
It is price adjustments subsequently.
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