Leasehold land converted to freehold

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 April 2013 A company has acquired land on lease for 30 years. After 5 years, by paying certain sum the lease is converted in to freehold. Earlier for 5 accounting years the leasehold amount was amortized. As at the last BS date the leasehold amount (Gross) appears on asset side and amortization reserve on the credit side.

My question is how to account for and disclose this in next BS.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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03 June 2013 On which basis you have amortised. Is is that the lease amount paid by you has been capitalised? If yes then the lease rent should have been debited but as it has been capitalised the amount paid for converstion should also be capitalised and the reserve entry should be reversed.