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Relocation expenses on major expansion

CAstud_end (Student ) (83 Points)

20 December 2016  
There is a major plant which is to be setup which is not possible without moving relocating part of the current plant. Essentially the plant is reorganised in order to properly accomodate the new plant. Can the costs incurred on relocating and reinstalling the existing machinery be capitalised to the new project as per IndAS 16

 5 Replies

Nitin Bhuta (Chartered Accountants) (688 Points)
Replied 20 December 2016

Yes it can be capitalised 

 

CAstud_end (Student ) (83 Points)
Replied 20 December 2016

Originally posted by : Nitin Bhuta
Yes it can be capitalised 

 

Can you provide basis for it.

Because para 20 of IndAS states relocation expenses cannot be capitalised

Nitin Bhuta (Chartered Accountants) (688 Points)
Replied 20 December 2016

Normal relocation expenses can't be capitalised but these expenses need to be incurred for establishing new plant thus it can capitalised as part of anciliary cost to establish new plant for carrying out business activities of the enterprise smoothly and effectively.

raghavendhra reddy (ca ipcc) (79 Points)
Replied 20 December 2016

am not sure of the new standards but two years back we had faced same situation ,company named ujala had shifted the plant,then we were internal auditors so we suggested them to go on for capitalisation but end y

raghavendhra reddy (ca ipcc) (79 Points)
Replied 20 December 2016

people advised them to go for half capitalisation and half revenue

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