10 June 2010
Whether land development cost , like filling of sand and soil in the land , is to be capitalised or to be written off completely in the same year ? Further will it make any difference if development work has been done along with the purchase of the land or subsequent to its acquisition ?
Please clarrify my doubt with good supportings. Thanks/Regards
10 June 2010
As per AS-10, 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. The cost of an addition or 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. Any addition or extension, which has a separate identity and is capable of being used after the existing asset is disposed of, is accounted for separately.
Hence, land development cost either at the time of initial purchase or later on should be capitalised.
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