Accounting Standard 10, AS 10 – Accounting for Fixed Assets

Accounting Standard 10, AS 10 – Accounting for Fixed Assets. Find Complete details for AS 10 (Accounting for Fix Assets). Here we are providing full details for AS 10. In this article you can find all details for Accounting Standard 10 like – Applicability of AS – 10, Revaluation of fix assets and Various terms related to fix assets.. Recently we provide AS – 12 Accounting for Government GrantsNow you can scroll down below and check complete details for “Accounting Standard – 10 Accounting for Fixed Assets

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Accounting Standard 10, AS 10 – Accounting for Fixed Assets

Applicability of this standard is said in a negative approach as

Important Update – 

Applicability of AS -10

  1. This standard does not deal with accounting for the following items :
  2. Forests, plantations and similar regenerative natural resources
  3. Wasting assets including mineral rights,
  4. Expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non regenerative resources
  5. Expenditure on real estate development
  6. livestock.

Terms to be understood :

1.Fixed Assets

Asset is a source on which the entity has control and ownership. 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.
In simple terms it’s the revenue generating source of an entity.

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2. Gross book value

Gross book value of a fixed asset is its historical cost or other amount which can be substituted for historical cost in the books of accounts .

3.Net book value

When we reduce the accumulated depreciation from gross book value then it’s called as Net book value.

Net book value = Gross book value – accumulated amount of depreciation.

4.Fair market value

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 price who are fully informed and are not under any compulsion to transact.

5. Directly attributable costs

These are the costs that can be directly allocated to the fixed assets

a. site preparation costs
b. initial delivery charges
c. handling costs
d. installation costs
e. professional fees, for example fees of architects and engineers for construction of a fixed asset.

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Components forming part of fixed assets

The cost of an item of fixed asset comprises its purchase price, including import duties and other non-refundable taxes and any directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchas price.

Self constructed fixed assets :

They are valued like normal fixed assets but any internally generated profit should be eliminated in arriving at the value to be shown in the financial statements.

Repairs and Improvements :

Frequently, it is very difficult to determine whether subsequent expenditur related to fixed asset represents improvements that ought to be added to the gross book value or repairs that ought to be charged to the profit and loss statement.

1. Only expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is included in the gross book value, e.g., an increase in capacity.

2.Otherwise they should be booked as expenditure.

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Exchange of fixed assets

When a fixed asset is acquired in exchange or in part exchange for another asset, the cost of the asset acquired should be recorded either at fair market value or at the net book value of the asset given up,adjusted for any balancing payment or receipt of cash or other consideration. For these purposes fair market value may be determined by reference either to the asset given up or to the asset acquired,whichever is more clearly evident. Fixed asset acquired in exchange for shares or other securities in the enterprise should be recorded at itsfair market value, or the fair market value of the securities issued, whichever is more clearly evident.

Retirement and disposal

1. Material items retired from active use and held for disposal should be stated at the lower of their net book value and net realisable value and shown separately in the financial statements.

2. Fixed asset should be eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal

3. Losses arising from the retirement or gains or losses arising from disposal of fixed asset which is carried at cost should be recognised in the profit and loss statement.

Revaluation of fixed assets

An increase in net book value arising on revaluation of fixed assets should be credited directly to owners’ interests under the head of revaluation reserve, except that, to the extent that such increase is related to and not greater than a decrease arising on revaluation previously recorded as a charge to the profit and lossstatement, it may be credited to the profit and loss statement. A decrease in net book value arising on revaluation of fixed asset should be charged directly to the profit and loss statement except that to the extent that such a decrease is related to an increase which was previously recorded as a credit to revaluation reserve and which has not been subsequently reversed.

Disclosure requirements

1. gross and net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements;

2. expenditure incurred on account of fixed assets in the course of construction or acquisition; and

3. revalued amounts substituted for historical costs of fixed assets,the method adopted to compute the revalued amounts, then a ture of indices used, the year of any appraisal made, and whether an external valuer was involved, in case where fixed assets are stated at revalued amounts.

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