Fixed Assets

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Shankar G

Assistant Manger Finance

55 Points Posted on 16 March 2011

Hi -

We have purchased a machinery three years back for Rs.100 Lacs from one of the reputed vendor and we have charged the depreciation on year on year basis. Now, due to technical problem assets was damaged a part. Even, Vendor has agreed to raise the credit note for Rs.20Lacs on a damaged parts.

I would like to know, whether I should reverse Rs.20Lacs in the asset value, if so whether we need to reverse Depreciation for the year charged or should I take into other income account? Please advice.

Regards

Shankar G

Replies (2)

shankar kumar jha.

chartered accountant

26 Points Posted on 21 March 2011

Dear Mr.G Shankar,

As far as i could understand from your query, you should treat the same in following manner:

If a particular asset part has got damaged you have received the compensation for that particular part of the asset.You decapitalise your asset part damaged and dispose it off.First book the loss on disposal and then get that loss set off aginst the compensation received.Compensation amount above the loss is you other income/miscellaneous income.

IAS-16 PROPERTY ,PLANT AND EQUIPMENT IS also talking about the part capitalisation of assets.corresponding IND As ca also be reffered in support of the reply.

Regards,

CA,Shankar Kumar Jha.

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