1. ACCOUNTING FOR FIXED ASSESTS
(AS-10)
PRESENTATION BY
MANSI
VAIDEHI
KENA
JALAJ
BHAVYESHA
DHAVAL
L.J INSTITUTE OF MANAGEMENT STUDIES
AHMEDABAD
GUJARAT
2. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Fixed Assets:
Fixed asset is an asset held with the intention of
being used for the purpose of producing or
providing goods or services and is not held for sale
in the normal course of business.
Examples:Land
Building
Plant and Machinery
Furniture etc.
3. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Applicability: This accounting standard is not applicable for the
following items:Forests, Plantations, and similar regenerative
resources.
Wasting assets like minerals , oil, and natural gas.
Expenditure on real estate development.
Live stock.
4. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Fixed assets in financial statement: Fixed assets shall be shown in financial statement by
two ways:Historical Cost
II. Revalued Price
I.
5. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Historical Cost:
The historical cost of acquired fixed assets consists of
the following
Purchase price
Import duties and other non-refundable taxes
Any directly attributable cost of bringing the asset
to the working condition for its intended use like:site preparation , delivery and handling cost ,
professional fees etc.
6. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Historical Cost of self constructed fixed assets:
Such fixed assets which were constructed by in-
house efforts are called as self constructed fixed
assets.
All costs which are directly related to the specific
asset.
All costs that are attributable to the construction
activity should be allocated to the specific assets.
Any internal profit included un the cost should be
eliminated.
7. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Cost of assets acquired in exchange of existing assets
Fixed assets exchanged not similar:
Assets acquired should be recorded either at fair market
value of assets given or assets acquired.
Fixed assets exchanged are similar:
Fixed assets acquired is recorded at fair market value of
assets given up or fair market value of assets acquired or
net book value of assets given up.
Fixed assets acquired in exchanged of share or
other securities:
Assets should be recorded at –either fair market value of
assets purchased or Fair market value of share of
securities whichever is clearly available.
8. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Revalued Price:
When a fixed asset is revalued, an entire class of assets
should be revalued or the selection of assets for revaluation
should be made on a systematic basis.
There are two methods of showing the
revalued amount in the financial statement.
By re-stating the gross book value and accumulated
depreciation.
By re-stating net book value adding there in the net
increase on account of revaluation.
Revaluation of fixed assets should be restricted to
the net recoverable amount of fixed assets.
9. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Accounting treatment of revaluation:
First time revaluation(upward):
Increase in net book value is credited to owners interest
under the head ‘ Revaluation Reserve’.
First time revaluation(Downward):
Decrease in net book value is charged to the profit & loss
account.
10. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Accounting treatment of revaluation:
First Revaluation (downward) Subsequent revaluation
(upward):
Decrease in net book value is charged to the profit & loss account
in the year in which downward revaluation was done.
Balance amount should be credited to revaluation reserve.
First Revaluation (upward) Subsequent revaluation
(downward):
Increase in net book value is credited to owners interest under
the head ‘ Revaluation Reserve’.
The balance amount of devaluation is charged to profit and loss
account.
11. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Valuation of fixed assets in special cases:
Assets acquired on higher purchase terms:
Such assets are recorded at their cash price.
Cost of jointly held assets:
Either the original cost, accumulated depreciation and
written down value should be stated in the balance sheet
Or Pro rata cost of such jointly owned assets is grouped
together with similar fully owned assets.
Fixed assets acquired at consolidated price:
Cost of each fixed asset should be determined on a fair
basis as per valuation by competent valuers.
12. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Improvements and Repair:
There are two accounting treatments of cost of
improvement and repairs.
After the improvements and repairs, expected future
benefits from fixed assets do not change.
The expense of improvement and repairs are charged to the
profit and loss account.
After the improvements and repairs, expected future
benefits from fixed assets will increase beyond the
previously assessed standard performance.
These expenses are included in the gross value of fixed
asset.
13. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Addition of capital nature to an existing asset
If integral part of existing asset- it is generally
added to gross book value of existing assets.
If separate identity and capable to be used after the
disposal of existing asset-it is accounted for separately.
Retirement and disposal:
Fixed assets are deleted from the financial statement either
on disposal or on expected economic benefit is over.
Gains and benefits arising are recognized in profit and loss
account.
14. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Fixed assets are retired from active use and held for
disposal.
Such asset is stated at the lower of net book value and net
realizable value in financial statement.
Any expected loss is recognized immediately in the profit and
loss account. It should be separately shown in balance sheet.
Disposal of previously revalued fixed assets.
If there is profit, then it is credited to profit and loss account.
If there is loss then it can be adjusted against the balance of
revaluation reserve.
15. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Disclosure:
Gross and net book values of fixed assets at the beginning
and at the end of accounting period
showing, disposal, acquisition and other movements.
Expenditure incurred on account of fixed assets in the course of
construction or acquisition.
Revalued amount substituted for historical cost of fixed
assets, the method adopted to compute the revalued amount, and
whether an external valuer has valued the fixed assets, in case
where fixed external has valued amount.
If there is loss then it can be adjusted against the balance of
revaluation reserve.
16. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Capitalization of exchange differences
incurred on fixed assets related borrowing
Instructions contain in part I of schedule VI of the
companies act, 1956 regarding adjustment of
exchange difference in the carrying amount of the
fixed assets due to change in the rate of exchange of
fixed assets linked liability denominated in foreign
exchange of fixed assets linked liability denominated
in foreign exchange has been superseded by issue of
companies.
17. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Bibliography:
STUDENTS GUIDE TO ACCOUNTING
STANDARDS by D.S.Rawat. (18th Addition)
18. ACCOUNTING FOR FIXED ASSESTS (AS-10)
Thanks for your attention
You can download the slides from
http://www.slideshare.net/JalajShah/accountin
g-for-fixed-assests-as-10
