20 May 2008
MR.X the director wants to sell his car to the company. The company in order to know the value purchases the car by way of a loan from the bank. The bank values the car at Rs. XXXX amount and grants the loan to that extent. Further it charges a valuation charges of Rs.XX amount. Should the valuation charge be capitalised to the cost of the car?
20 May 2008
Actually any expenditure directly connected with the acquisition of asset has to be capitalised. But such expenditure if added to the purchase value, will push it to more than the intrinsic value, there is no point in adding that. You can as well charge it off as revenue.
20 May 2008
Thank you sir. But, cant this be treated somewhat similar to the professional charges incurred in relation to aquisition of the asset as specified in Para 9 of AS 10 because, the value of the asset would not be known to the company had the valuation has not been done.
21 May 2008
You can. That is what I have pointed out. But suppose the value is determined as X, If the professional charges are added and value after adding prof. charges becomes X plus, then it will be more than the intrinsic value is what I pointed out.
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