Dear Members
I have a query regarding treatement of Fixed Asset and Depreciation under follwinfg condition
Fixed Asset Purchased on 1.3.2012 but not ready for use, it was ready for use on 1.5.2012
Regards
Asif Iqbal
Md Asif Iqbal (Accountant) (37 Points)
12 March 2013Dear Members
I have a query regarding treatement of Fixed Asset and Depreciation under follwinfg condition
Fixed Asset Purchased on 1.3.2012 but not ready for use, it was ready for use on 1.5.2012
Regards
Asif Iqbal
Giridhar S Karandikar
(Team Lead)
(7543 Points)
Replied 12 March 2013
If the fixed asset ie bing installed in the factory but not put to use then also as per AS-6 Depreciation Accounting depreciation is to provided. Becaseu as per the said standard depreciation is as a result of use, passage or efflusion of time etc.. So Depreciation needs to be provided. Also once the asset is being installed it means that it is ready for use though the use may be deferred, but the depreciatio charge would continue to incur as explained.
Md Asif Iqbal
(Accountant)
(37 Points)
Replied 12 March 2013
that takes care of Depreciation what about treatement of Fixed Asset
Regards
Asif
Giridhar S Karandikar
(Team Lead)
(7543 Points)
Replied 12 March 2013
If you claiming Depreciation then obviously Fixed Asset would be required to be capitalized.
Md Asif Iqbal
(Accountant)
(37 Points)
Replied 15 March 2013
I have doubt about you explanation and the capilatization takes plase once the asset is ready for use
Regards
Asif
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 23 March 2013
Dear Asif,
AS 6 'Depreciation Accounting' recognizes the concept 'useful life'. Depreciation should be charged over the useful life of the asset. The estimation of 'useful life' lies with you or your supplier or some technical analysis. Once you have purchased the asset you should capitalize that amount. Depreciation as I said should be spread over the useful life.
Under section 32 of the Income Tax Act you could claim depreciation only from the date you have put the asset to use.
As per AS 16 'Borrowing Cost' you could capitalize the interest paid on borrowings for acquiring an asset till the date it is put to use 'if' the asset is a 'qualifying asset'.
So I agree with the suggestion of Giridhar.
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