Servicing equipments are normally capitalised in Indian GAAP whereas in IFRS they are carried as inventory and recognised in income statement as consumed.
Can anybody give me an example of a servicing equipments of such kind?
Also would appreciate if anyone can share differences he/she knows between IFRS and Indian GAAP regarding inventory valuation, i.e. AS2
A Comparision between various GAAPs' Inventories Definition All four frameworks define inventories as those: held for sale in the ordinary course of business; in the process of production or for sale in the form of materials; or supplies to be consumed in the production process or in the rendering of services. Measurement IAS
Carried at the lower of cost or net realisable value (being sale proceeds less all further costs to bring the inventories to completion). Reversal
US GAAP replacement cost subject to an upper limit of net realisable value and a lower limit of net realisable value less a normal profit margin. Reversal of a write down is prohibited. UK GAAP Indian GAAP Formula for determining cost Method IAS US GAAP UK GAAP INDIAN GAAP LIFO. FIFO. Weighted average cost. GAAP differences Comparison of GAAP requirements under IAS, US, UK and India (i) Allowed alternative : Where an entity values inventory using LIFO, it must quantify and disclose the difference between that method and either the lower of : the benchmark treatment (either FIFO or weighted average) and net realiasable value; or the lower of current cost at the balance sheet date and NRV. Consistency of the cost formula for similar inventories ssets IAS US GAAP UK GAAP Indian GAAP Allocation of fixed overheads IAS US GAAP UK GAAP Indian GAAP REFERENCES: IAS:
is required for a subsequent increase in value of inventory previously written down.
Regarding Servicing Equipment :
If the cost of servicing equipment is significant in relaion to the Cost of PPE only then Servicing Equipment needs to be capitalised otherwise you may book these under inventory and charge off to P&L as and when consumed.
Example :
In case of Oil filling Machine you may capitalised this but small servicing equipment like screew drivers, etc. No need to capitalised take these to inventory and charge off as and when consumed.
Regards
good one
CAclubindia
