DIEL has incurred the following transactions for acquiring Plant 'X' in part exchange of an old Plant Y. (in Lakhs) Sale of scrap from the old site…

CA Final · Financial Reporting · MTP · November 2026
DIEL has incurred the following transactions for acquiring Plant 'X' in part exchange of an old Plant Y. (in Lakhs) Sale of scrap from the old site 10 Cost of construction of new site 480 Fair value of the old Plant Y, at which the supplier of the new Plant X has agreed to take it 26 The cash price paid to supplier for new Plant X 320 The carrying amount of old Plant Y 10 The present value of estimated dismantling cost of the site at the end of its useful life 16 Wages paid for installation of the Plant 40 Wages paid for Trial Run 16 Freight paid 16 GST @ 18% is paid both on purchase of plant and on freight. DIEL is eligible to claim Input Tax Credit on same. Loss amount for low-capacity utilization of the plant after installation 40 Cost of launching the product to be produced from the plant 10 Administration and general overheads 20 Incidental cost not directly related to installation 5 DIEL has entered into certain transactions with regard to acquiring Plant 'X' in part exchange of an old Plant Y. Based on the data given in the case study in this regard, answer the following: (i) How will the Assets be recognized/derecognised, in the books of DIEL, as per Ind AS? (ii) At what value the assets be recognised in the books DIEL? (iii) How will Plant Y given in part exchange for Plant X be accounted for? (iv) Pass journal entry for recognition of Plant X by derecognising Plant Y

Suggested Answer and Working Notes:

(i) DIEL will be recognising two items of Property, Plant and Equipment (PPE) viz 1. Recognise Plant X by derecognising Plant Y 2. Recognise New Site by derecognising the old site Both the items of PPE will be shown under the heading 'Non-Current Assets" in the Balance Sheet. (ii) A. Statement showing initial measurement of Plant X: Particulars in lakh Cash price of Plant X 320 Add: Fair value of the old pant given-up i.e. Plant Y 26 Purchase price of Plant X 346 Add: Directly attributable cost Wages paid for installation of Plant X 40 Wages paid for Trial Run (16) 16 Freight paid 16 Initial cost of Plant X 418 Note: (a) 'Loss amount for low-capacity utilization of the plant after installation' of ₹ 40 lakhs and 'Cost of launching the product to be produced from the plant' of ₹ 10 lakhs are not directly attributable costs related to the acquisition of Plant X. Hence, they will be charged to Statement of Profit and Loss. (b) Expenditure incurred on 'Administration and general overhead' ₹ 20 lakhs and 'Incidental cost not directly related to installation' ₹ 5 lakhs will also be charged to Statement of Profit and Loss and would not be capitalised to the cost of Plant X. (c) Since DIEL is eligible to claim Input Tax Credit against GST paid on acquiring of Plant X and for its freight, it is a recoverable tax and hence would not be considered for capitalisation to the cost of Plant X. (d) Cost related to new site would be a separate item of PPE and would not be considered in computation of cost of Plant X. B. Statement showing initial measurement of New Site: Particulars in lakh Cost of construction of new site 480 Add: Present value of estimated dismantling cost of the site at the end of its useful life 16 496 Less: Sale of scrap from old site (10) Initial cost of new site 486 (iii) Derecognition of Plant Y in lakh Fair value of old plant taken over 26 Less: Carrying amount of old plant (10) Gain on Plant Y due to its fair valuation charged to Statement of Profit and Loss 16 (iv) Journal Entry in lakh in lakh Plant X (320 + 26) Dr. 346 To Plant Y 10 To Bank 320 To gain on exchange of assets 16

Topics: Ind AS 16

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