MS SS Pipe Accounting

The Revised AS-10 is in accordance with INDAS 16. This means, it should be treated as a fixed asset when the asset has useful life of more than 12 months, it can be measured reliably and it is solely used for production purpose ie,, part of PPE. 

Then, it is separately recognised and presented in the balance sheet as a fixed asset and depreciated.

As I have observed, there is a remark here: spare parts are treated as inventory as well in IAS 16, INDAS 16 & Revised AS-10 while in the old AS 10 it is expensed. This nature of transaction’s measurement & recognition is sort of confusing because, like in your scenario, if you don’t store spares and replace them when items are obsolete does not need the involvement of Inventory. So, it can also be presented under Inspection & Overhaul expenses. 

As 10.12 is suggesting that subsequent costs like small spare parts are expensed. 

If your holding them as spares in your ware house, they can be classify as inventory if the criteria is met.

You should make the judgement if those items are directly fitted into machinery or if they are used as tools used to repair machinery. 

If the spares you hold live for 2-3 years, one has to identify if it is a replacement part or a servicing part or a day to day cost. Replacement parts are included in the carrying amount of PPE while the old part cost which was dismantled will be derecognised.

Then finally, day to day spare part costs are expensed and treated under Repairs and Maintenance. 

If you read AS 10.12&13, you will be able to understand classification of the above items based on the operation and usage of items. 

https://www.mca.gov.in/Ministry/pdf/AS10_16012018.pdf

. Note: the first answers criteria about recognising it as Inspection and overhaul costs separately is for IAS 16. In AS 10, please follow the method of capitalising these costs into carrying amount of PPE and derecognising the old cost of replaced item.