Estimates of useful life and residual value need to be reviewed at least at each financial year-end.	There is no need for an annual review of estimates of useful life and residual value.  An entity may review the same periodically.
Depreciation on revaluation portion cannot be recouped out of revaluation reserve and will have to be charged to the P&L account.	Depreciation on revaluation portion can be recouped out of revaluation reserve.
Provision on site-restoration and dismantling is mandatory. To the extent it relates to the fixed asset, the changes are added/deducted from the asset in the relevant period.	No guidance in the standard.  However, guidance note on oil and gas issued by ICAI, requires capitalization of site restoration cost. Discounting is prohibited under Indian GAAP.
Any appropriate Method can used	Only SLM and WDV can used
If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognised as interest over the period of credit.	No specific requirement under AS 10.

Hi Amit

"The spare parts and servicing equipment are normally treated as inventory and expensed as consumed. But major spare parts and stand by equipment treated as PPE, when they are expected to be used during more than one period".

In the above para you have used the words " more than one period". Does it mean more than one accounting year? For example in a process industry like sugar manufacturing industry the manufacgturing season starts from September to October. As soon as the season is over the entire set of machinery is overhauled i.e. brokedown for maintainance.  The Rollers which crush the cane & the knives which cut the cane are changed.  Now, do these rollers & knives be capitalized?

Regards

Umakanth

 

Dear Umakant,

As per your example.. Rollers and knives is the major part of machinary without this machine cant work. So no doubt that its part of PPE only which need to be capitalised. But when u will capitalised on that time u need to derecognised the depreciated cost of knives and rollers which is included in the PPE.

So effectively new asset cost will be capitalised and old asset cost will be derecognised

Best Regards

Amit Daga

Dear Umakant,

As per your example.. Rollers and knives is the major part of machinary without this machine cant work. So no doubt that its part of PPE only which need to be capitalised. But when u will capitalised on that time u need to derecognised the depreciated cost of knives and rollers which is included in the PPE.

So effectively new asset cost will be capitalised and old asset cost will be derecognised

Best Regards

Amit Daga

Hi Amit

Thanks for the clarification.

Regards

Umakanth

Dear Uma, One more thing i will tell you, If you read my all the mssg . Depreciation will be charged as per useful life of the assets . In this case useful life of the asset is one year only. So at the end of the year .Assets will be fully depreciated. There fore, there will be no value will be remain in the books of assets because in the first year itself you need to charge 100% depreciation. In this case there is no question of derecognising is also coming because at the end of the year value of depreciation will be zero. But if there will be any value we need to derecognise the value of that assets

Hi Amit

Actually the rollers are just a part of the machine.  The machine is being depreciated as per companies act.   After the crushing is over the rollers are detached from the machinery.  A roller is a very big shaft with metal moulded over it as per speciafications. This shaft is sent to the contractor for moulding the metal as per specificaions.  The contractor gives discount for the metal still lying on the shaft and charges only for the balance along with the taxes.  We are not capitalizing the rollers but charging off to p&l.  Actually the capacity of the machinery is not increased because of the replacement of the roller but only restored back to the earlier capacity.

FYI

Regards

Umakanth

Than definetly it will be charged to P/L only. I thought  its major part.... if its not major part and its useful is not more than one yr .... than it will be charge to P/L only... and in IFRS Depreciation is depend upon the useful life of the assets not according to any act.. Once IFRS will come into the picture.. Companies act will change

mr. amit may i know from which site you have copied this? as i want to get all the IFRS

Miss Devanshi..

Nothing is copy paste.. I never do copy paste until i dont know abt the subject.. if i dont know the subject i dont send

I am working with ABB as a Finance Controller.. In my current assignment i am engaged in the implementation on IFRS... Thatswhy along with the implementation i need to give the training to other controllers too.. So this is the copy of my presentation only which i prepared with the help of few books, from some site information , from inst material and from some presentation which i have ...

If you want i send you my presentation where i have no probs .. may be that will be useful for you

I have one suggestion for you.. if you want to learn ifrs.. dont run so fast.. toherwise you will not able to understand.. so do systematically and whatever standard u read.. read completely and if u get any probs clear it u can ask me or consult with others

If you want presentation i can send u ...

 

Thanks

Amit

 

My question is with regard to mandatory spares with are supplied with the  asset & are asset specific & of irregular use.As per AS-10 these are capitalised & depriciation is charged  over the useful life of the asset.Kindly through some light on treatment of these mandatory spares as per IFRS?

A Company is taking land on lease to develop Housing for its employees which would subsequently be handed over to employees.

Company pays lease rent on the this land during construction phase.  Can we capitalise the same as part of project cost?

A Lease could either be a Finance Lease or an Operating Lease (para 8,Ind As 17).One of the ways to identify a lease would be that in Finance Lease, the lease term is for the major part of the economic life of an asset, while Operating Lease lasts considerably less than the life of the asset.

 Generally leases on land are considered operating leases as lands have indefinite economic life (Para 15A Ind As 17). The title is not expected to be passed to the lessee at the end of the lease term. This indicates that the lessor does not pass on the substantial risk and rewards of the ownership of the land to the lessee.

As per para 33, Ind AS 17 – “Lease payments under an operating lease shall be recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern

of the user’s benefit”

Hence in my opinion in the instant case, the Present Value of the Lease payments be found out with reference to the economic life of the Building and the entities Internal Rate of Return.

This Present Value has to be added to the Project Cost / Building.

Regards / Mohit

Could you please tell me if IFRS talks about the Costs of formation of a company, whether they should be capitalized or not? and upto when?.

 

Thanks

Yusuf

Hello Amit,

Can you please advise, about the treatment of land taken on lease. 

Per my opinion, land should be recognised as prepaid expense (operating lease) and amortized over the life, if it is a case of short term operating lease.

But I have come across a situation in my company wherein the lease period of land was 250 years and they are doing above accounting teatment.

 

Please advise.