Accounting Standard 10

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Exposure Draft
Accounting Standard (AS) 10 (revised)

Tangible Fixed Assets

(Last date for Comments: February 28, 2006)

The Institute of Chartered Accountants of India

Issued by Accounting Standards Board

Exposure Draft
Revised AS 10, Tangible Fixed Assets

Contents
INVITATION TO COMMENT [Exposure Draft] Accounting Standard AS 10 (revised) Pages 4-5

Tangible Fixed Assets
OBJECTIVE SCOPE DEFINITIONS RECOGNITION Initial Costs Subsequent Costs MEASUREMENT AT RECOGNITION Elements of Cost Measurement of Cost MEASUREMENT AFTER RECOGNITION Cost Model Revaluation Model Depreciation Depreciable amount and depreciation period Depreciation method Impairment Paragraphs 1 2-5 6 7-15 11-12 13-15 16-30 17-23 24-30 31-66 32 33-43 44-63 49-60 61-63 64

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Compensation for Impairment DERECOGNITION DISCLOSURE TRANSITIONAL PROVISIONS APPENDICES A. B. Comparison with IAS 16, Property, Plant and Equipment

65-66 67-71 72-78 79-83

Major Differences between the Exposure Draft of revised AS 10, Tangible Fixed Assets, and pre-revised AS 10, Accounting for Fixed Assets (1985) and AS 6, Depreciation Accounting (1994)

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INVITATION TO COMMENT
The Accounting Standards Board of the Institute of Chartered Accountants of India invites comments on any aspect of this Exposure Draft of the revised Accounting Standard (AS) 10, Tangible Fixed Assets. The Board would particularly welcome answers to the questions set out below. Comments are most helpful if they indicate the specific paragraph or group of paragraphs to which they relate, contain a clear rationale and, where applicable, provide a suggestion for alternative wording. Comments should be submitted in writing to the Secretary, Accounting Standards Board, The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi – 110 002, so as to be received not later than February 28, 2006. Comments can also be sent by e-mail at edcommentsasb@icai.org org tdte@icai.org. Question 1 – Treatment for Replacement of Major Component Parts IAS 16 is based on the component approach. Under this approach, each part of a tangible fixed asset having cost that is significant in relation to its total cost is depreciated separately. As a corollary, cost of replacing such parts is capitalised, if recognition criteria are met with consequent derecognition of the carrying amount of the replaced part. The cost of replacing those parts which have not been depreciated separately is also capitalised with the consequent derecognition of the replaced parts. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed. Exposure Draft of revised AS 10 also recognises the component approach. However, it does not mandatorily require adoption of the said approach on the lines of IAS 16. The exposure draft recognises that the accounting for a tangible fixed asset improves if the total cost thereof is allocated to its major component parts, provided they are in practice separable, and estimates can be made of the useful lives of these parts. It requires such parts to be depreciated separately. It also requires the cost of replacing such parts to be capitalised with the consequent derecognition of the replaced parts. At the time of replacement of a major part, in respect of the parts which have not been depreciated separately, the draft provides an option either to capitalise the cost of replacement with the consequent derecognition of the replaced parts or to recognise such costs in the statement of profit and loss. Do you agree that unlike IAS 16, the Standard should give an option of not insisting on segregation of an asset into its major components? If not, why not? Question 2 – Treatment of Major Inspection or Overhaul Costs IAS 16 requires the cost of major inspections to be...
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