|Deals with the treatment of Tangible Fixed Assets|
| Tangible Fixed Asset:
IS an asset being land, building, machinery, plant or furniture 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.
| Fair value
Is the value of an asset, i.e. is the amount for which that asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
Identification of Tangible Fixed Assets
- Definition stated above provides criteria for determining whether an item is to be classified as a tangible fixed asset.
- Stand-by equipment and servicing equipment are to be capitalised
- Machinery spares shall be charged to the revenue as and when consumed. When such spares can be used only in connection with an item of tangible fixed asset and their use is expected to be irregular, they shall be capitalised.
Computation of cost of Fixed Asset
- In self constructed assets, component of internal profit has to be removed.
- Depreciation would be as per provisions of the Act.
- Sales/ Transfer would be as per provisions of the Act.
| Block of asset
Rate of depreciation
Actual cost or WDV as the case may be
Additions for the year:
(i) With date of put to use
(ii) CENVAT credit claimed and allowed
(iii) Change in exchange rate of currency
(iv) Subsidy or grant received.
Deductions during the year
WDV at the end of the year.
Key differences with AS 10
| When assets are acquired by exchanging another asset, AS requires that the cost of the asset shall be the fair value of the asset acquired or given up whichever is clearly evident. However ICDS requires such transactions to be recorded at the fair value of the asset acquired.
AS specifies accounting treatment in circumstances of revaluation of asset, ICDS is silent on that as Income tax does not recognise the concept of revaluation.