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UPS battery capitalisation


Rohit (student)     23 July 2016

Rohit
student 
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whether ups battery to be capitalised or not. please guide.

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CA Kishore D (Management Consultant | Trainer)     23 July 2016

CA Kishore D
Management Consultant | Trainer 
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Hi Rohit,

 

Replacement of a battery does not 'increase' the useful life of the asset, it just maintains the existing useful life. Therefore this is not regarded as capital expenditure, and hence cannot be capitalized as a part of the asset. This is the treatment under existing AS 10.

Under Ind-AS 16 however, component approach is applicable. Therefore, the entire UPS would have been broken down into components and capitalized. In that case, the battery is recognized as a separate asset by itself, and hence replacement of the battery can be accounted as a separate fixed asset.

Hope this helps.

 

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Rohit (student)     23 July 2016

Rohit
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Thank u very much sir for your reply. For F.Y 2015-16 Ind As 16 won't be applicable if I m correct. So I should treat it as per AS 10. Am I Right.?

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CA Kishore D (Management Consultant | Trainer)     23 July 2016

CA Kishore D
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For FY 2015-16, it is not applicable per-se. However, if the company is falling under the applicability criteria for 2016-17, then the previous year's figures need to be restated. But that is not something you need to worry about now.

 

For now its just AS 10.

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Rohit (student)     23 July 2016

Rohit
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Thank u very much sir...crisp & clear explanation­čśŐ

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Dharmesh (Student)     24 July 2016

Dharmesh
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Hi Sir,

Isnt component accounting prescribed under Companies Act 2013 ? Or its optional ?

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CA Kishore D (Management Consultant | Trainer)     24 July 2016

CA Kishore D
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Component Account is a part of Ind-AS 16

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Praveen Kumar Agarwal (Accountant)     27 July 2016

Praveen Kumar Agarwal
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why cant a UPS be capitalized as a separate fixed asset item and shown in the balance sheet?


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