AS-10 – Accounting for Fixed Assets :

Financial statements disclose information regarding fixed assets such as land and building, plant and machinery, vehicles, furniture and fittings, goodwill, patents, trade marks and designs etc. This standard deals with accounting for these fixed assets. The cost of fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Finance cost relating to borrowed funds upto the completion of construction or acquisition of assets are also included in the cost of asset. Administrative and other general overhead expenses are usually excluded from the cost of fixed assets. In case of self constructed assets, only direct costs are included in the cost of the asset. In an exchange of asset, the cost of assets given up should be taken as the value of new asset. Sometimes, market value of such assets is also taken when circumstances permit. Subsequent expenditures related to an item of fixed asset should be added to its book value only if they increase the future benefits from the existing asset. Fixed asset should be eliminated from the financial statements on disposal or when no further benefit is expected from its use.

On revaluation of assets in books, the asset at net value is revalued and similar increase in gross value is made without changing depreciation figure. When a fixed asset is revalued upwards, accumulated depreciation existing at the date of revaluation should not be credited to profit and loss account. An increase in net book value arising on revaluation of fixed assets should be credited directly to owner’s interest under revaluation reserve and should not be used for any purpose except to write off decrease in value of assets. The following information should be disclosed in the financial statements:

(i) Gross and net book values of fixed assets at the beginning and at the end of the accounting period showing additions, disposals, acquisition etc.

(ii) Proper disclosure should also be made regarding expenditures incurred in the course of construction or acquisition.

(iii) Information in respect of revalued assets should include revalued amount substituted for historical cost of fixed assets, the method adopted to compute the revalued amounts, the nature of indices used, the year of any appraisal made and whether an external valuer was involved etc.