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By G NARENDRAN B.COM., ACA.,ACMA., CS
MEASUREMENT PRINCIPLES IN ACCOUNTING STANDARDS UNDER COMPANIES (Accounting Standards) RULES 2006 By G NARENDRAN B.COM., ACA.,ACMA., CS
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FRAMEWORK FOR ASSET RELATED ACCOUNTING STANDARDS
Initial recognition criteria Subsequent additions Subsequent measurements De-recognition criteria
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AS 10 - PROPERTY, PLANT AND EQUIPMENT (Revised)
TANGIBLE ASSETS AS 26 - INTANGIBLE ASSETS INTANGIBLE ASSETS
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INITIAL RECOGNITION CRITERIA
it is probable that future economic benefits associated with the item will flow to the enterprise (b) the cost of the item can be measured reliably
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SAFETY AND ENVIRONMENTAL EQUIPMENTS
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INITIAL MEASUREMENT The cost of an item of PPE comprises:
its purchase price - trade discounts and rebates + import duties and non-refundable purchase taxes,. any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. the initial estimate of the costs of dismantling at present value
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DIRECTLY ATTRIBUTABLE COST
Costs of employee benefits Costs of site preparation Initial delivery and handling costs Installation and assembly costs Costs of testing whether the asset is functioning properly, after deducting the net proceeds from the production on test run Professional fees Borrowing cost to the extent permitted under AS 16
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EXAMPLES OF COST NOT TO BE CAPITALIZED
Pre-operative expenses Advertisement and promotional cost Training cost Cost of relocating the entity’s operation
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COST OF DISMANTLING/DECOMMISSIONING
The elements of cost to be incorporated in the initial recognition of an asset are to include the estimated costs of its eventual dismantlement. That is, the cost of the asset is "grossed up" for these estimated terminal costs, with the offsetting credit being posted to a liability account.
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COST OF SELF CONSTRUCTED ASSET
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EXCHANGE OF ASSETS Exchange of items of PPE , regardless of whether the assets are similar, are measured at fair value, unless: the exchange transaction lacks commercial substance the fair value of neither of the asset exchanges can be measured reliably If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up
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SUBSEQUENT COST The issue is whether subsequent expenditure is capital expenditure (i.e., to the Balance Sheet) or revenue expenditure (i.e., profit or loss statement) The cost of regular replacement is capitalized, if the recognition criteria are met. If not, they will be posted to profit or loss statement The carrying amount of replaced parts (old parts) is derecognized (i.e., treated as a disposal)
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SUBSEQUENT MEASUREMENT
Cost Model Carry at cost less any accumulated depreciation and any accumulated impairment losses Revaluation Model Carry at a revalued amount, being fair value at the date of the revaluation less any subsequent accumulated depreciation and any accumulated impairment losses
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DEPRECIATION Significant component Useful life Residual value
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DEPRECIABLE AMOUNT Factors to be considered Expected usage
Expected physical wear and tear Technical obsolescence
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DEPRECIATION METHODS Straight line Diminishing balance Sum of units
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DEPRECIATION AS PER SCHEDULE II OF THE COMPANIES ACT, 2013
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TREATMENT OF LAND DEVELOPMENT COST
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AS 26 – INTANGIBLE ASSETS
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RECOGNITION CRITERIA Future economic benefits Reliably measured
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COST OF INTANGIBLE ASSETS
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SELF GENERATED GOODWILL
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RESEARCH AND DEVELOPMENT
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COST OF INTERNALLY GENERATED INTANGIBLES
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CARRYING AMOUNT OF INTANGIBLES
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Impairment loss = Carrying amount minus recoverable amount
IMPAIRMENT OF ASSETS Impairment loss = Carrying amount minus recoverable amount
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Mail : cagnarendran@gmail.com
Thank you G NARENDRAN Mail : Phone :
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