Suman Kumawat (Article) (612 Points)
27 February 2014
Deepak Gupta
(CA Student)
(15922 Points)
Replied 27 February 2014
| Originally posted by : Kumawat Suman | ||
 |
A company has sold some old machinery for 1crore. the details of the cost of such machinery are not available since the entire recording relating to fixed asset has been destroyed in on earthquake!! How to deal with this?? |  |
-- The company may therefore, have to determine the same on some estimated basis provided all reasonable efforts to determine the Cost/WDV of the machinery do not yield any better result.
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-- An all out attempt should be made by the management to reconstruct the old records. Such records may be constructed by obtaining old copies of annual reports distributed amongst shareholders, annual accounts filed with Registrar of Company; IT Returns filed by the auditor may also be having record of physical verification of earlier years etc.
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-- In fact, through this process, the company shall be able to determine the WDV of the asset because the machinery sold seems to be quite big and must have been recorded on standalone basis.
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-- The auditor will have to see whether the estimate of cost and WDV arrived at in the above manner by the company is reasonable and whether the profit/loss is determined accordingly. A note to that effect would also have to be given by the management in the accounts.
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[Similar to Q. 14(a) of IPC Audit May 2011 RTP]
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