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Amortisation on land

Piyush Jain (CA) (283 Points)

22 April 2010

Our client has provided depreciation(amortisation) on land. he is providing that a sthe land is leasehold (for 99 years) and therby the lease amount should be amortised for the said period.

Pls provide the correct treatment.

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5 Replies

Nicky (Chartered Accountant) (245 Points)
Replied 22 April 2010

Pretty interesting query..

a) Treat the money piad towards lease for 99 years as a deposit.......

b) Pass an entry every year 1/99 of the total lease as lease rental ...

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Amir (Learner) (4016 Points)
Replied 23 April 2010

Dear Piyush Sir,

The treatment suggested by Nicky Sir is correct.......

Just want to support his answer by saying that AS-19 "Accounting for lease" specificaly excludes the accounting of lease for use of Land..

So in this case it will be recognised/treated as per General Accounting principles of "Matching Concept" & hence lease premium will be amortised over the lease term..

Further the above answer will change under convergence with IFRS where Lease also includes "lease for use of land"

Piyush Jain (CA) (283 Points)
Replied 23 April 2010

Thanks Nicky and Amir. But how will they show the land a) as an asset less amortisation every year or b) just booking the lease as expense and showing the balance as deffered expenditure.

Thanks.