As- 10 fixed assets

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Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2013 Hi ,

Whether company acquires certain fixed assets at free of cost , can be recorded in Books of accounts?? There is no consideration for this acquisition. Company is using the assets to get the economic benefits flow to the enterprise.

CA Prashant Gupta

CA Prashant Gupta (Expert)
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25 February 2013 as per my view, it must come into fixed asset register.
but on nomial value i.e. 1 Rs.
so that it can be controlled.

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Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2013 Few more opinions required....Thanks

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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14 July 2024 Under Accounting Standard (AS) 10 - Property, Plant and Equipment, the acquisition of fixed assets at no cost, where there is no consideration involved, can still be recorded in the books of accounts under specific conditions. Here’s how it can be treated:

### Recognition and Measurement:

1. **Recognition Criteria:**
- According to AS 10, an item of property, plant, and equipment should be recognized as an asset if, and only if:
- It is probable that future economic benefits associated with the asset will flow to the entity.
- The cost of the asset can be measured reliably.

2. **Measurement:**
- When fixed assets are acquired at no cost, their initial recognition should be at their fair value at the date of acquisition. Fair value represents the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.

### Conditions for Recording at No Cost:

- **Probable Future Economic Benefits:** The asset acquired at no cost must still be expected to generate future economic benefits for the entity. This expectation should be supported by evidence such as the intended use of the asset in the entity's operations.

- **Reliable Measurement:** Although the asset is acquired without cost, its fair value at the acquisition date should be determined and recorded. Fair value could be estimated based on market prices of similar assets or other appropriate valuation methods.

### Accounting Treatment:

- **Initial Recognition:** Record the asset at its fair value at the date of acquisition. This fair value will form the initial carrying amount of the asset in the books of accounts.

- **Subsequent Measurement:** After initial recognition, the asset should be accounted for in accordance with AS 10. This includes depreciation over the asset's useful life, any impairment losses, and eventual disposal.

### Example:

If a company receives a piece of machinery at no cost from a supplier or as a donation, the fair value of the machinery should be determined at the date of acquisition. This fair value becomes the initial carrying amount of the machinery in the company's books of accounts. Subsequently, the machinery is depreciated over its useful life, reflecting its consumption of economic benefits over time.

### Conclusion:

Assets acquired at no cost can be recorded in the books of accounts under AS 10, provided that future economic benefits from the asset are probable and its fair value at acquisition date can be reliably measured. Proper documentation and justification of fair value estimation are crucial to comply with accounting standards and ensure accurate financial reporting.