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Investment or inventory or fixed asset?

manoj (Account Executive) (37 Points)

29 October 2018

A private ltd company carrying on business of real estate can show purchase of land and building hold for 5 year or more as Non Current Investment..??

is it voilation of AS ??

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satish (teaching) (2046 Points)
Replied 29 October 2018

Recognition of Asset under AS 10 Property, Plant and Equipment

The cost of property and P&E should be recognized as an asset only if:
(i) it is apparent that the future economic benefits related to such asset would flow to the business; and
(ii) the cost of such asset could be reliably measured.

Investment Property :
It is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise.

Inventory as per AS 2:
A. Held for sale in the normal course of business i.e finished goods
B. Goods which are in the production process i.e work in progress
C. Raw materials which are consumed during production process or rendering of services (including consumable stores item)

if it is used in development of your business fixed assets, only for investment sake then it is to be consider as investment property, or for sale after development of property - stock in trade

now you can decide based on the intention of the organization....

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