Describe the main provisions of AS-10 in respect of measurement of cost of property, plant and equipment.
Answers
Explanation:
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Applicability of AS 10 Property, Plant and Equipment
AS 10 is to be applied in accounting for property, P&E (Plant and Equipment) and this standard are not applicable to:
(a) biological assets which are related to agricultural activities except for bearer plants. The Standard is applicable to bearer plants, however, it doesn’t apply to the produce on bearer plants; and
(b) wasting assets which include mineral rights, expenses related to exploration for and extraction of oil, minerals, natural gas and other non-regenerative resources.
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Answer:
The Main provisions of AS-10 to measure the cost of Property, Plant and Equipment are:
1. Cost Model: Once the assets are recognized, the item of PPE may carried at low cost than accumalted depreciation and any accumulated losses as per cost model which includes
a) Acquisition cost, included import duties and non- refundable purchase taxes.
b) Costs directly associated to bringing the assets to the location.
c) Cost of dismantling and restoration of assets on the site where it located.
Example: cost of site preparation, initial delivery and handling costs, professional fees etc.,
2. Revalution Model: under this after the assets recognized, an item of PPE should carried at revalue price. Revalue price is nothing but Fair value of the PPE. Revalution must be made at regular intervals.
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