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ANNOUNCEMENT
Status of certain provisions of AS
10, Accounting for Fixed Assets, pursuant to the issuance of AS
19, Leases and AS 16, Borrowing Costs
1. Accounting Standard (AS) 19, Leases,
has come into effect in respect of assets leased during accounting
periods commencing on or after 1-4-2001. AS 19 also applies to
assets acquired on hire purchase during accounting periods commencing
on or after 1-4-2001. Accordingly, paragraphs 15.1 and 33 of Accounting
Standard (AS) 10, Accounting for Fixed Assets, which deal with
assets acquired on hire purchase terms, are not applicable in
respect of assets acquired on hire purchase during accounting
periods commencing on or after 1-4-2001.
2. Pursuant to issuance of Accounting Standard (AS) 16, Borrowing
Costs, provisions of paragraph 9.5 of Accounting Standard (AS)
10, Accounting for Fixed Assets, stand withdrawn to the extent
they deal with borrowing costs. Paragraph 9.5 of AS 10 is reproduced
below:
“9.5 If the interval between the
date a project is ready to commence commercial production and
the date at which commercial production actually begins is prolonged,
all expenses incurred during this period are charged to the
profit and loss statement. However, the expenditure incurred
during this period is also sometimes treated as deferred revenue
expenditure to be amortised over a period not exceeding 3 to
5 years after the commencement of commercial production.”
It may be noted that paragraph 9.5
of AS 10 as reproduced above relates to “all expenses” incurred
during the period. This expenditure would also include borrowing
costs incurred during the said period. Since AS 16 specifically
deals with the treatment of borrowing costs, the treatment provided
by AS 16 would prevail over the provisions in this respect contained
in AS 10, as the provisions of AS 10 are general in nature and
apply to “all expenses”.
It may be noted that paragraphs 9.2
and 20 (except the first sentence) of AS 10, Accounting for Fixed
Assets, have already been withdrawn pursuant to issuance of AS
16.
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