Page 103 - IC26 LIFE INSURANCE FINANCE

The cost of fixed asset is deducted with:

 Trade discounts and rebates

 Sale proceeds of test run production

 Amount of government grants received/receivable against fixed assets (See AS- 12)

 Gain on deferred payment arising out of foreign currency liability

Similarly, historical cost of self constructed fixed assets will include:

 All cost which are directly related to the specific asset

 All costs that are attributable to the construction activity should be allocated to fixed assets

 Any internal profit included in the cost should be eliminated.

Any expenses incurred on asset between date of ready for use and put to use is either charged to P&L A/c or

treated as deferred revenue expenditure to be amortised in 3-5 years after commencement of production.

When fixed asset is acquired in exchange for another asset, the cost of the asset acquired should be

recorded either at, fair market value or at, the net book value of the assets given up

For this purpose, fair market value may be determined by reference either to the asset given up or to the

asset acquired, whichever is more clearly evident.

Fixed asset acquired in exchange for shares or other securities should be recorded at FMV of assets given up

or asset acquired, whichever is more clearly evident. (i.e the option of recording the asset at net book value

of asset given up is closed)

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