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ICDS

ICDS. CA Subodh V. SHAH. Icds v : TANGIBLE FIXED ASSETS. ICDS V: Tangible Fixed Assets.

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ICDS

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  1. ICDS CA Subodh V. SHAH

  2. Icds v : TANGIBLE FIXED ASSETS CA Subodh V. Shah

  3. ICDS V: Tangible Fixed Assets • “Tangible fixed asset” is an asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business CA Subodh V. Shah

  4. ICDS V: Tangible Fixed Assets • Thus there is no option to expense off immaterial assets which will result in burdensome compliances and record keeping. • AS10 allows us to expense off such items CA Subodh V. Shah

  5. ICDS V: Tangible Fixed Assets • “Fair value” of an asset is the amount for which that asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. CA Subodh V. Shah

  6. ICDS V: Tangible Fixed Assets • Stand‐by equipment and servicing equipment are to be capitalised. • Machinery spares shall be charged to the revenue as and when consumed. CA Subodh V. Shah

  7. ICDS V: Tangible Fixed Assets • When such spares can be used only in connection with an item of tangible fixed asset and their use is expected to be irregular, they shall be capitalised. • AS-10 allows us to allocate such total cost on a systematic basis over a period not exceeding useful life of the asset. CA Subodh V. Shah

  8. ICDS V: COMPONENTS OF ACTUAL COST • Purchase price • Import duties • Other taxes excluding recoverable • Direct expenditure • Trade discounts / rebates to be reduced CA Subodh V. Shah

  9. ICDS V: COMPONENTS OF ACTUAL COST • Actual cost may change due to • price adjustment, changes in duties or similar factors • exchange fluctuation CA Subodh V. Shah

  10. ICDS V: COMPONENTS OF ACTUAL COST • Administration and other general overhead expenses are to be excluded if they do not relate to a specific tangible fixed asset CA Subodh V. Shah

  11. ICDS V: COMPONENTS OF ACTUAL COST • Costs will include • Expenses on start up & commissioning • Expenses on test runs • Expenses after the plant has begun commercial production shall be treated as revenue CA Subodh V. Shah

  12. ICDS V: COMPONENTS OF ACTUAL COST • Thus expenses after the project is ready to commence commercial production but before it actually commences commercial production will also have to be capitalised. • In AS 10 we can write off such expenditure as revenue or treat it as deferred revenue CA Subodh V. Shah

  13. ICDS V: NON MONETORY CONSIDERATION • The fair value of a tangible fixed asset acquired in exchange for shares or other securities or another asset shall be its actual cost. CA Subodh V. Shah

  14. ICDS V: NON MONETORY CONSIDERATION • In AS-10 the fair value of the asset acquired or the asset given up whichever is more evident is to be taken. CA Subodh V. Shah

  15. ICDS V: Improvements and Repairs • An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost CA Subodh V. Shah

  16. ICDS V: Improvements and Repairs • Any extension to existing asset which becomes integral part of such asset to be capitalised. • If such addition / extension has a separate identity and can be used separately then treat as separate asset CA Subodh V. Shah

  17. ICDS V: joint ownership • Details of jointly owned tangible fixed assets shall be indicated separately in the tangible fixed assets register. • Where several assets are purchased for a consolidated price, the consideration shall be apportioned to the various assets on a fair basis CA Subodh V. Shah

  18. ICDS V: Tangible Fixed Assets • The ICDS also provides that depreciation on such assets and income arising on transfer of such assets shall be computed in accordance with the provisions of the Income-tax Act, 1961 CA Subodh V. Shah

  19. ICDS V: Tangible Fixed Assets • ICDS prescribes disclosure requirement similar to requirement of Tax Audit Report. • Even the persons not subject to tax audit have to comply with such disclosure requirement. CA Subodh V. Shah

  20. ICDS V: revaluation • Revaluation is not permitted by the ICDS. • Income / expense is to be recognised only on actual realisation. CA Subodh V. Shah

  21. ICDS VIII :SECURITIES CA Subodh V. Shah

  22. ICDS VIII: Securities • This ICDS deals with securities held as stock‐in‐trade. • Does not apply to • interest and dividends on securities • securities held by a person engaged in the business of insurance • securities held by mutual funds, venture capital funds, banks and public financial institutions CA Subodh V. Shah

  23. ICDS VIII: Securities • “Securities” shall have the meaning assigned to it in clause of Section 2 of the Securities Contract Regulation Act, 1956 42 of 1956, other than Derivatives • referred to in sub‐clause 1a of that clause CA Subodh V. Shah

  24. ICDS VIII: initial recognition • It requires securities to be recognized at actual cost on acquisition, which shall comprise of its purchase price and include acquisition charges like brokerage, fees, tax, duty or cess. CA Subodh V. Shah

  25. ICDS VIII: initial recognition • The actual cost of a security acquired in exchange for other securities or another asset shall be the fair value of the security so acquired. CA Subodh V. Shah

  26. ICDS VIII: initial recognition • In case unpaid interest has accrued prior to the acquisition of the security and is included in the purchase price then: • Interest should be allocated between pre‐acquisition and post‐acquisition periods. • Pre-acquisition interest should be reduced from cost CA Subodh V. Shah

  27. ICDS VIII: SUBSEQUENT RECOGNITION • At the end of the year securities held as stock-in trade have to be valued at actual cost initially recognized or net realizable value at the end of that previous year, whichever is lower. • Comparison of actual cost initially recognized and net realizable value has to be done category-wise and not for each individual security. CA Subodh V. Shah

  28. ICDS VIII: SUBSEQUENT RECOGNITION • The categories are as under • shares; • debt securities; • convertible securities; and • any other securities not covered above. CA Subodh V. Shah

  29. ICDS VIII: SUBSEQUENT RECOGNITION • Comparison of actual cost and net realizable value to be done category-wise may cause unrealized income to be recognized which is against the policy of prudence. CA Subodh V. Shah

  30. ICDS VIII : new business • If an assessee starts the business of securities during the previous year then value of securities shall be the cost of securities on the day of commencement of the business. CA Subodh V. Shah

  31. ICDS VIII: Securities • Valuation of unlisted or irregularly traded securities at actual cost initially recognized. • Securities not listed on a recognized stock exchange; or • Securities listed but not quoted on a recognized stock exchange with regularity from time to time. • This will impact the tax liability. CA Subodh V. Shah

  32. ICDS VIII: Securities • If actual cost cannot be specifically ascertained then cost of such security shall be determined on FIFO basis. CA Subodh V. Shah

  33. THANK YOU CA Subodh V. Shah

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