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Stok in trade wrongly considered as fixed asset

Gudipati Roja (Audit manager) (131 Points)

26 November 2020

Hope everyone doing well

I have a query i.e., X.Co is into infrastructure development and construction related activity. Land purchased as stock in trade is wrongly shown as fixed asset in FY 2018-19. Now what to be done to show it as inventory? whether last year financials has to be revised or previous year's figures of current financial year can be re-grouped.

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5 Replies

gameplaysNmore (96 Points)
Replied 26 November 2020

Previous years figures can't be changed and the re-grouping can't be done. If you want to treat purchased land as stock in trade, kindly consider such change in current financial year.

Gudipati Roja (Audit manager) (131 Points)
Replied 26 November 2020

If i change it in current year then stock as per BS and P& l will be different

gameplaysNmore (96 Points)
Replied 26 November 2020

You need to mention such change in notes to accounts that the land purchased in so and so financial year was treated as fixed asset and now from current financial year we are treating this as stock in trade and the respective effect of such change.

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 27 November 2020

Prior period items AS 5, got away with a tax benefit with depreciation. The treatment is not clear in AS 5 as to what needs to be done with tax as tax implications are not allowed to adjustment. Are there are any tax laws which deal with this? Use them, derecognise fixed asset, add it to inventory as per AS 2. Contact a tax specialist and check out what needs to be done,

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 27 November 2020

Fine!! it’s not a building? I did not notice it. Anyways, Land can be easily dealt with. How is it measured, revaluation? You can change everything and adjust the amounts from 18-19 fy and make any adjustments necessary to revaluation reserves appropriately. Sry for trouble.

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