selim (Manager (Finance) ) (62 Points)
28 April 2014Dear Friends,
I badly need a help of you on following case;
- X ltd takes a lease of Fiber Optic Cable right of usage for 15 years from Z ltd.
- The cable's remaining lifetime is equal to 15 years.
- X ltd will pay maintenance/insurance charge Rs 60 lac per year till end of 15 years.
- X ltd will pay Rs 23 crore as upfront.
What will be the accounting treatment of above case in both income statement and balance sheet.
Many thanks for your co operation.
Jag Bhushan Sharma
(Faculty in a B-School)
(633 Points)
Replied 28 April 2014
The amount paid upfront Rs.23 crore will be shown in Balance Sheet and every year it will be amortised. Rs.60 lacs paid every year on account of maintenance and insureance will be debited to Profit & Loss A/c.
www.jbsclasses.com
Jag Bhushan Sharma
(Faculty in a B-School)
(633 Points)
Replied 28 April 2014
The amount paid upfront Rs.23 crore will be shown in Balance Sheet and every year it will be amortised. Rs.60 lacs paid every year on account of maintenance and insureance will be debited to Profit & Loss A/c.
www.jbsclasses.com
selim
(Manager (Finance) )
(62 Points)
Replied 29 April 2014
Thank you sir. As far as i know know there should be a finance cost / miinimum lease payment obligations while booking finance lease. Can you please suggest.
CAclubindia
