Fixed Asset or Stock

Final 808 views 4 replies

CA CS Amit Borade

Chief Accountant

2828 Points Joined December 2007

Hi Friends

A Indian Company which is 100 % subsidiary of Foreign Company (FC=Manufacturer of Lab Equipments & Scientific Equipments), established in India for marketing, consultation, repairs & AMC of Lab Equipments on behalf of Parent Company. All equipments directly sold by foreign company to Indian Customers.

There are some cases where Indian Sub.company receives Lab Equipments parts from Foreign Co, which assembled in India & used for testing purpose & DEMO. After some time on demand of any Indian customer such LE's sold by Indian company.

Currently Indian company is treating such Lab Equipments received as Fixed Asset & the same are capitalized as Lab Equipments.

My question is whether the company’s treatment is right???

Thnaks & Regards

Amit

Replies (4)

CA Babit Khurana

learning is my passion

338 Points Joined December 2009

As Per AS 10 Accounting for fixed assets, Fixed assets is an assets which are held for the purpose of used in business and have no intention for resale. But in your case ultimate intention is sale of equipment. Then as on ligal ground as per AS-10 nsame shall not be treated as Fixed assets.

Pl clerify if i am wrong

CA Sultan.........never quits

Financial Controller

511 Points Joined December 2008

Dear Amitab,

Babit Khurana is right. When a asset is used for the purpose of use in the businees then it can be classified as fixed assets. In this case the LE's are assembled and kept for DEMO. The intenetion of the compnay is to show the LE 's to its customer to sell the products. This is nothing but stock.

Hence to be classified as stock.

CA LOVELY ARORA

C.A. B.Com (H) Graduate

2151 Points Joined August 2008

yes, all of above are correct......... treat it as Stock............ the final intention is re-sale, not using it in the business for business operations...........