Fixed asset

In my opinion The capitaliosation date will be the date on which the asset is put to use because the depreciation will be calculated from that date in the year of purchase. Although the value of asset at the time receaching in your hand will be the value of asset to be entered in the accounts. Entry date will also be the GRN date. The difference between the foriegn currancy will be accounted in the fluctuation in foriegn currency ledger.

If you want to do your entry on creditor basis then you may also book the asset value on the basis of invoice date and value.

Thank you,

this is what I've done actually....

but I've a difference in opinion when it come to valuation.....as the price of one of the pumps is paid before it reaches me....there is no foreign exchange adjustment required on that.......

The value of asset before and after reaches you will be same if there is no foreign exchange adjsutment required then what is the problem ?

No Khushbu.....the asset is imported from Japan...so there are exchange adjustments.....but that never happens on one of the pumps as its price is paid before it reaches me......but the second one in which the price is not paid...there arise exchange adjustments

In my opinion, (in case a single invoice is made for both pump) you should book both the pump on the value which is the value of pump before reaching u and do the foreign exchange adjustment entry for one of the pump and provide depreciation from the date on which they put to use.

because booking two same type of fixed asset which is purchased at same time, in two different method would not be right.

(in case two different invoices are made) then u should book different pump in different time i.e. book one pump at the value before reaching u and the other pump at the value after reaching u.

And u plz wait for advice of some experts.

But how can you book an asset before it reaches your hands.?...it does not satisfy the asset criteria.....does the situation that two assets are purchased at the same time...affects their valuation.....?

I'm not sure....

Strange question and strange answer.

why is that question so strange ? this is a real situation I'm talking about...

Dear Jishnu Surendran,

Are you Sure Exchange rate Difference on Any Advance payment Never Accounted for on year end date/Balance Sheet Date?

Is the Same is in consistency with Para 14 of AS-11

-14. An exchange difference results when there is a change in the exchange rate between the transaction date and the date of settlement of any monetary items arising from a foreign currency transaction. When the transaction is settled within the same accounting period as that in which it occurred, all the exchange difference is recognised in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each intervening period up to the period of settlement is determined by the change in exchange rates during that period.

Further you mentioned First Payment  27/02/2011  paid the price of one pump.........re. 6,97,726...1.64 yen/re...products  still in transit.

At the same time you have mentioned Invoice Date   20/12/2011 11,44,100 yen for each pump   rate 1.5 yen/re.

So Your First payment is Partial payment of One Pump.

Can you clarify?

Originally posted by : Khushbu Jaiswal
	In my opinion The capitaliosation date will be the date on which the asset is put to use because the depreciation will be calculated from that date in the year of purchase. Although the value of asset at the time receaching in your hand will be the value of asset to be entered in the accounts. Entry date will also be the GRN date. The difference between the foriegn currancy will be accounted in the fluctuation in foriegn currency ledger. If you want to do your entry on creditor basis then you may also book the asset value on the basis of invoice date and value.

Here, once again some clarification need you

Capitalisation of fixed asset should be done at rate adopted by custom department for the purpose of imposing of custom duty (BOE date ) & at the tme making the of payment apply AS-11, charges as revenue & expenses in books of A/c  

Furhter more foreign exchange losses or gain will adjusted against capitalized value of fixed asset while caculating of dep. under income Tax Act   (under section 43A)

Guys...the question...'when should I capitalise?' is however..not too important because I know the answer...the when it satisfies the definition criteria....so concentrate on what value should I do it....

Dear Jishnu Surendran,

In Financial Year 2012-13 you have received Bill of Entry / Document for Payment of Customs Duty and also Both the Pumps.

For Payment of Customs duty consider BOE and Total Invoice value raised by supplier with exchange rate in BOE should be considered for valuation.

Other Import expenses (OTHER THEN refundable) related to that import consignment should also be capitalized. Balance or difference if any adjusted against Exchange rate difference.

First of all, thanks for sharing such practical issue and it is very relevant covering AS 10, 11.

First, recognise the asset on the basis of date of invoice on the rate of exchange on that date i.e @ 1.5.

while making payment you have to adjust the difference amount in the value asset - motor pump or can be charged to P&L a/c at your option