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Lease hold land

Zeeshan (Charterend Accountant) (549 Points)

30 September 2011

What should be the treatment of Leasehold Land in Books of Accounts?

Whether a lumpsum payment of lease rent to acquire leasehold land for certain period is compulsorily to be capitalised in books?
Is there any legal requuirement to capitalise the leasehold land as FA?

or alternatively,

Company can book the advance lease rent as prepaid expenses and yearly amortise the same?

Now the ball is in your Cort...Please hit the ball in light with the requirements of Accounting Standards...!!

Would like to remind you AS-19 is not applicable to Leasehold Land so we need to take shelter of AS 10 only.

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4 Replies

ashish gupta ( student) (1922 Points)
Replied 01 October 2011

this is a very interesting question and we have faced this situation in practical life.

In my opinion the amount should be capitalised and leasehold land should be shown in assets by following the AS-1 substance over form principle and at the same time an equal amount should be written off each year.

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Zeeshan (Charterend Accountant) (549 Points)
Replied 03 October 2011

Dear Ashish,

As you said substance over from...Then in this case scenerio is that the Leasehold land is not yours and you are the possessor of the same for a limited period of time as specified in the Lease Agreement. So why should one capitalise the same rather treating it as prepaid expense?

Regards,

Zeeshan