A Private Company which is a manufacturing unit is having 110 acres of Freehold Land and has Leased 2 acres of Land for 99 years. What should be accounting treatment for such transaction??
26 September 2011
Well, in case of Free hold land, same is required to be recorded at cost and no depreciation is required to be charged. Also, upward revaluation is premissible, if the increase in the value of land is permenant by creating revaluaation reserve.
In case of leasedhold asset, you are required to charge the depreciation as per straight line method, or if the lease rent is paid on annual basis, then the annual lease rent will be charged to profir & loss a/c directly and any lump-sum amount paid in advance is required to depreciated on SLM basis
CAclubindia
