The CFO of the company wants to know at what value would this asset be recognised in the books of accounts. PREPARE a statement showing him the…

In accordance with Ind AS 16, all costs required to bring an asset to its present location and condition for its intended use should be capitalized. Therefore, the initial purchase price of the asset should be: List price 160,00,000 Less: Trade discount (10%) ₹ (16,00,000) 144,00,000 Import duty 10,00,000 Delivery fees 2,00,000 Electrical installation costs 20,00,000 Pre-production testing (Net of Sale Proceeds of 2,00,000) 8,00,000 Total amount to be capitalized 184,00,000 Maintenance contract is a separate contract to get service, therefore, the maintenance contract cost of 14,00,000 should be taken as a prepaid expense and charged to the profit or loss over a period of 5 years. In addition, the settlement discount received of 7,20,000 (₹ 144,00,000 x 5%) is to be shown as other income in the profit or loss. The operating loss incurred after commercial launch cannot be capitalised. Hence those figures are being ignored.