Bala Pullaiah B (Salaried) (179 Points)
02 December 2008Hi,
My company was taken a land from the government on 99 years lease basis by paying 1crore for 99 years. At the end of it we donot get this money back. Please let me know how to amortise this amount in P & L?.
1. By way of depreciation.
2. Do I need to show separately.
Please through some light on this?
Balu
Rishubh Mathur
(Analyst -Taxation)
(442 Points)
Replied 02 December 2008
My friend!
In case this lease is non-cancellable and lease rentals are payable as consideration, you may first create a leasehold asset under the head - "Fixed Asset", from the sum payable as miminum lease rentals payable over the lease term.
Fixed annual charge may be recognized as an expense over the lease term in Income statement.
Bala Pullaiah B
(Salaried)
(179 Points)
Replied 02 December 2008
| Originally posted by :Rishubh Mathur | ||
| " | My friend! In case this lease is non-cancellable and lease rentals are payable as consideration, you may first create a leasehold asset under the head - "Fixed Asset", from the sum payable as miminum lease rentals payable over the lease term. Fixed annual charge may be recognized as an expense over the lease term in Income statement. |
" |
Hi
After completion of 99 Years this amount is not refundable. So, I have to amortise this amount in 99 Years. What is the Profit & Loss account treatment.
To depreciate or To show as annual rent 1 Lakh per annam
I did not clear on the P & L aspect.
Balu
Tushar Agarwal
(TRAINEE)
(24 Points)
Replied 02 February 2009
| Originally posted by :Guest | ||
| " | Land was acquired under lease for a period of 90 yrs for construction of commercial property. There was a scheme as per the lessor that one time lease rent could be paid which amounted to 11 yrs lease rent and rest of the lease rent for the remaining period of the lease could be waived off. Under the circumstances, what should the lessee treat such one time lease rent expense as, should they debit in the year of payment to expense or amortize over 90 yr period. | " |
in case of leasehold land for 99 years or more some companies treat the land as freehold.
companies like HPCL claim that this treatment has some legal precedence as well, so the issue of treatment of land on lease for 99 years or more has to be looked in deeply.
Tushar Agarwal
(TRAINEE)
(24 Points)
Replied 02 February 2009
| Originally posted by :Guest | ||
| " | Land was acquired under lease for a period of 90 yrs for construction of commercial property. There was a scheme as per the lessor that one time lease rent could be paid which amounted to 11 yrs lease rent and rest of the lease rent for the remaining period of the lease could be waived off. Under the circumstances, what should the lessee treat such one time lease rent expense as, should they debit in the year of payment to expense or amortize over 90 yr period. | " |
in case of leasehold land for 99 years or more some companies treat the land as freehold.
companies like HPCL claim that this treatment has some legal precedence as well, so the issue of treatment of land on lease for 99 years or more has to be looked in deeply.
Vijay Subaramaniyan
(Articled Assistant)
(22 Points)
Replied 23 February 2011
I have a question with respect to accounting for leasehold land because AS-19 specifically excludes "lease agreements with respect to land" and AS-10 does not deal with "accounting for Leases". Under which standard do we capitalise and amortise ?
Kishore PVGK
(Director)
(27 Points)
Replied 26 October 2018
Is there any update under INDAS atleast to understand under which standard we can show 99 years land lease as Fixed asset and depreciate?
Require clarification which got missed out in all earlier responses.
CAclubindia
