NAME:-AKASH JAISWAL

ROLL NO.:-0645
ROOM NO.:-045
B.COM(M):-SEM-I
SESSION:-2014-2017
TOPIC:-ACCOUNTING FOR FIXED
ASSETS(AS-10)
INTRODUCTION- Accounting standard for fixed assets(AS-10) is issued by
Institute Of Chartered Accountant Of India(ICAI).As per ICAI, an asset is recognised as a
fixed asset if it satisfies the following criteria-

*held with the intention of being used for the purpose of producing/providing goods and
services.

*not held for sale in the normal course of business.

*expected to be used for more than one accounting period.

Examples- land, building, plant, machinery, patent, etc.

Does not deal with-a) Accounting of forests/ plantations etc., wasting assets,
expenditure on real estate development and livestock,

b)Inflation Accounting of fixed assets,

c) Allocation of depreciation,

d) Treatment of Subsidies,

e) Assets under leasing rights, etc.

TYPES- Assets are of two types- a) tangible assets and intangible assets.

Tangible assets- Tangible assets are assets that one can touch, hold, or feel. In accounting
literature, tangible assets are the physical things that a business uses in the production of
goods and service.

Examples- They constitute the production facilities, buildings, equipment, and

vehicles. These operational assets of a business include furniture, computers and similar
items not used up within a year.

Intangible assets- Intangible assets are identifiable non-monetary assets without physical
substance held for use in the production or supply of goods and services and are also
primarily financing items.

Examples- stocks, bonds, mortgages, etc.

Fair market value- It 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.
Gross book value- 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.

Components of cost- the components of cost mainly consists of the cost

incurred for bringing the assets in working conditions and commissioning of cost of
purchase. It includes-
a) site preparation,
b) initial delivery and handling costs
c) installation fees and
d) professional fees.
The cost of a purchased fixed asset should consist of its purchase price
including import duties and other non-refundable taxes and levies and any directly
attributable cost of bringing the asset to its working condition for its intended use.the
expenditure incurred on test runs and experimental production is capitalised as an indirect
element of the construction cost. If the time gap between the date a project is ready to
commence production and when production actually begins is prolonged, all expenses
incurred during this period are charged to the profit and loss statement.

Self-constructed fixed assets- the cost of a self-constructed fixed asset

should comprise those costs that relate directly to the specific asset and those that are
attributable to the construction activity in general and can be allocated to the specific asset.

Non-monetary consideration- 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 balance payment or receipt of cash or other consideration.

For this purpose, fair market value may be determined by reference either to
the asset given up or to the asset acquired, whichever is more clearly evident.

Other consideration-
Assets acquired on hire purchase- it is recorded at their cash value with a suitable
disclosure, that the enterprise does not have full ownership thereof.

Assets owned jointly with others- it is recorded in the balance sheet to the extent of the
enterprise’s share in such assets, original cost, accumulated depreciation and written down
value. Alternatively, the pro-rata cost of those assets may be grouped together with similar
fully owned assets with an appropriate disclosure.
Assets purchased for a consolidated price- where several assets are purchased for a
consolidated price, the consideration is apportioned to the various assets on a fair basis
determined by competent valuers.

Disposal/Retirement of assets- when assets are retired from active use

and held for disposal it is to be stated at net book value and net realisable value whichever is
lower. When Assets are disposed or retired, it should be eliminated from financial statement
on disposal or when no further benefit is expected. Any gains/losses arising from retirement
or from disposal of a fixed asset which is carried at cost should be recognized in the profit
and loss a/c. where a revalued item is disposed off , any loss or gain should be charged or
credited to the profit and loss a/c.

However, to the extent that such loss is related to an upward

revaluation which has not been subsequently reversed or utilized, it may be charged directly
to that account.

Revaluation of fixed assets- when a revaluation is made, either an entire

class of assets should be revalued, or the selection of assets should be made on a systematic
basis. The basis should be disclosed. The revaluation in financial statements of a class of
assets should not result in the net book value of that class being greater than the recoverable
amount of assets of that class. When a fixed asset is revalued upwards, any accumulated
depreciation existing at the date of the revaluation should not be credited to the profit & loss
account.

Improvements and repairs- it is difficult to determine whether

subsequent expenditure 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.the
cost of an addition or an extension to an existing asset which is of a capital nature and which
becomes an integral part of the existing asset is usually added to its gross book value.

Fixed assets of special types-

Goodwill- As a matter of financial prudence, goodwill is written over a period. However,
many enterprises do not write off goodwill and retain it as an asset. Goodwill needs to be
accounted for only when some consideration in money or money’s worth has been paid for it.

Patents- Patents are normally written off over their legal term of validity or over their
working life, whichever is shorter.

Disclosure (as per AS-10)- certain specific disclosures on accounting for

fixed assets are already required by as-1 on disclosure of accounting policies and as-6.
Further disclosures that are sometimes made in financial statements include-

i) Gross and net value of fixed assets at the beginning and end of an accounting
period showing additions, disposals, acquisitions and other movement.
ii) Expenditure incurred on account of fixed assets in the course of construction or
acquisition.
iii) Revalued amount substituted for historical costs of fixed assets, the method
adopted to compute the revalued amounts, the nature of any indicates used, the
year of any appraisal made and whether an external valuer was involved, in case
where fixed assets are stated at revalued amounts.
 REFERENCE

I) Mukherjee.A.K. and Mukherjee.s., Financial Accounting Volume-1

II) Fundamentals of accounting issued by Institute Of Chartered Accountant.
III) www.knowledgebible.com