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Query on WIP which is to be capitalised

Anil (1638 Points)

06 June 2009

A company has some amount under WIP. These are expenses incurred which will be capitlised later under the asset block - furniture and fixture. These are basically expenses incurred on company showroom refurbishing

Questions

1) Under Indian AS where this amount is to be disclosed in Balance sheet ? Kindly quote AS number.

2)Under IFRS where this amount is to be disclosed in Balance sheet?Kindly quote IFRS number.

3)Please let me know is it wrong to classify this under the head WIP under Current Assets.If yes, why?

Please answer all questions separately in the order question is asked.

Many thanks.

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6 Replies

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 10 August 2009

Anil it cant be WIP..Because its capital expenditure

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Anil (1638 Points)
Replied 10 August 2009

The work is under progress.It is not complete yet.Once the work is complete it will definetly be taken as capital expenditure. The question is how should one treat the amount being spent when the work is not complet yet.

KINDLY quote references to Institue guidelines / AS / IFRS.

Thanks for your response.

Anil.

C.A Rohit Gambhir (C.A) (275 Points)
Replied 10 August 2009

Schedule -VI of the Companies Act requires the disclosure of Capital Work in Progress as follows :

(a) Fixed assets:

(i) Gross block
(ii) Less: Depreciation
(iii) Net block

(iv) Capital work-in-progress

Note : CWIP Includes Advances given for Capital Expenditure.

AS 10 Para 39 9(ii) requires separate disclosure for expenditure incurred on account of fixed assets in the course of construction or acquisition.

Under IFRS CWIP should be added along with the PPE as a single line item as “ Property Plant & Equipment including Capital Work in progress”.

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C.A Rohit Gambhir (C.A) (275 Points)
Replied 10 August 2009

Schedule -VI of the Companies Act requires the disclosure of Capital Work in Progress as follows :

(a) Fixed assets:

(i) Gross block
(ii) Less: Depreciation
(iii) Net block

(iv) Capital work-in-progress

Note : CWIP Includes Advances given for Capital Expenditure.

AS 10 Para 39 9(ii) requires separate disclosure for expenditure incurred on account of fixed assets in the course of construction or acquisition.

IAS 16 Under IFRS CWIP should be added along with the PPE as a single line item as “ Property Plant & Equipment including Capital Work in progress”.

However As per IAS 1 Presentation of Financials Statements - Structure & Contents of Balance Sheet PPE is there in the list of minimum line items for Balance Sheet. IAS 1 doesnt prohibits adding a new line item for better presentaion . Therefore you may also show " Capital Work in progress a separate line item below the Property, Plant & Equipment.

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