01 March 2008
IN CASE OF AN MOVABLE VEHICLE LIKE LOCO IF ITS MOTOR IS CHANGED AND MAJOR PARTS OF ITS BODY IS ALSO REPAIRED. BUT ITS REGISTRATION NO. IS NOT CHANGED. THIS MAY RESULT IN INCREASE IN THE PREVIOUS ESTIMATED LIFE OF THE ASSET. BUT IT DOES NOT RESULT IN CHANGE IN ITS CARRYING CAPACITY. SHOULD SUCH EXPENDITURE BE CAPITALISED OR TREATED AS REVENUE EXPENDITURE?
01 March 2008
SUBSEQUENT EXPENDITURES RELATED TO AN ITEM OF FIXED ASSET SHOULD BE ADDED TO ITS BOOK VALUE ONLY IF THEY INCREASE THE FUTURE BENEFITS FROM THE EXISTING ASSET BEYOND ITS PREVIOUSLY ASSESSED STANDARD OF PERFOMANCES & IN INCREASED IN ESTIMATED LIFE. SO IN YOUR CASE YOU CAN CAPITALISED THE AMOUNT IF IT IS SATISFYING THE ABOVE CONDITIONS.
03 March 2008
If any expenditure on the existing assets increase the life of the asset then it should be capitalised. In ur question, the expediture on its motor may be capitalised, but the repairs of body part should be charged to revenue.
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