Accounting Standard (AS) 10
Accounting for Fixed Assets
INTRODUCTION Definitions EXPLANATION Identification of Fixed Assets Components of Cost Self-constructed Fixed Assets Non-monetary Consideration Improvements and Repairs Amount Substituted for Historical Cost Retirements and Disposals Valuation of Fixed Assets in Special Cases Fixed Assets of Special Types Disclosure MAIN PRINCIPLES Disclosure Paragraphs 1-6 6 7-17 8 9 10 11 12 13 14 15 16 17 18-37 37
134 AS 10 (issued 1985)
Accounting Standard (AS) 10 Accounting for Fixed Assets
(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.)
1. Financial statements disclose certain information relating to fixed assets. In many enterprises these assets are grouped into various categories, such as land, buildings, plant and machinery, vehicles, furniture and fittings, goodwill, patents, trade marks and designs. This standard deals with accounting for such fixed assets except as described in paragraphs 2 to 5 below. 2. This standard does not deal with the specialised aspects of accounting for fixed assets that arise under a comprehensive system reflecting the effects of changing prices but applies to financial statements prepared on historical cost basis. 3. This standard does not deal with accounting for the following items to which special considerations apply: (i) forests, plantations and similar regenerative natural resources; (ii) wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources; (iii) expenditure on real estate development; and (iv) livestock. Expenditure on individual items of fixed assets used to develop or maintain the activities covered in (i) to (iv) above, but separable from those activities, are to be accounted for in accordance with this Standard.
98 AS 10
4. This standard does not cover the allocation of the depreciable amount of fixed assets to future periods since this subject is dealt with in Accounting Standard 6 on ‘Depreciation Accounting’. 5. This standard does not deal with the treatment of government grants and subsidies, and assets under leasing rights. It makes only a brief reference to the capitalisation of borrowing costs and to assets acquired in an amalgamation or merger. These subjects require more extensive consideration than can be given within this Standard.
6. The following terms are used in this Standard with the meanings specified: 6.l 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. 6.2 Fair market value is the price that would be agreed to in an open and unrestricted market between knowledgeable and willing parties dealing at arm’s length who are fully informed and are not under any compulsion to transact. 6.3 Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account or financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value.
7. Fixed assets often comprise a significant portion of the total assets of an enterprise, and therefore are important in the presentation of financial position. Furthermore, the determination of whether an expenditure represents an asset or an expense can have a material effect on an enterprise’s reported results of operations.
8. Identification of Fixed Assets
8.1 The definition in paragraph 6.1 gives criteria for determining whether items are to be classified as fixed assets. Judgement is required in applying...