Lease hold land

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.

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

When we use the words Prepaid Rent / Expense, it reflects some sort of short term in nature like say for not more than 12 months.

So for the better presentation of accounts if lease is for a longer period then it should be shown as assets.

It means if I will go for say for 2 or 3 years lease agreement, Should I capitalise the Leasehold assets?

No way... I am not comfirtable with this. I think we need to look at other criterias as well for capitalisation of Assets.

Let us talk about Accounting Standard 10 ; Accounting for FA is goverened by AS 10.