JAYANTA KUMAR BANDYOPADHYAY (professional service) (293 Points)
25 November 2021We have placed one import PO.
There is a loss of roll life due to minor mistake in dimension. But usable with a lower economic life
The shipper wants to compensate importer by 1% cut in price
This being a Capex item-whether compensation to be treated as Revenue or a reduction in capitalisation value.
What Accounting Standard states-please guide.
Thanks in advance
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 25 November 2021
The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. So cost - discount in price = capitalised value.
Next, because we have paid upfront the cost of machinery without discount, credit 1% to profit and loss as discount received.
Finally, if you did not pay for the machinery yet, make an error entry and reduce 1% from creditors account.
As 10 standard covers this. getdocument (mca.gov.in)
Manish
(CA)
(1174 Points)
Replied 25 November 2021
AS 10, para 9.1
"The cost of a fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments, changes in duties or similar factors."
This could be a price adjustment, which will lead to a reduction in capitalised value.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 25 November 2021
It is price adjustments subsequently.
CAclubindia
