Comparison Chart of ICDS-V, AS-10 & IndAS-16 - Income Tax - Ready Reckoner - Income Tax

Topic ICDS Indian GAAP Ind AS Property, Plant and Equipment ICDS V relating to tangible fixed assets AS 10 - Property, Plant and Equipment Ind AS 16 - Property, Plant and Equipment Identification of Fixed Assets The tangible fixed asset is any asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing goods or services and is not held for sale in the normal course of business. There is no option of expensing off of immaterial assets resulting in onerous compliances and record keeping. Fixed asset is an asset 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. However, an enterprise may decide to expense an item which could otherwise have been included as fixed asset, because the amount of the expenditure is not material. Similar to Indian GAAP. However, IndAS does not prescribe expensing any immaterial item. Major Spare Parts Machinery spares which can be used only in connection with a Tangible fixed asset and where use is irregular, have to be capitalised. Machinery spares are usually charged to profit and loss as and when consumed. However, if such spares can be used only in connection with an item of fixed asset and their use is expected to be irregular, it may be appropriate to allocate total cost on a systematic basis over a period not exceeding the useful life of the principal item. Spare parts are recognised in accordance with IndAS 16 when they meet the definition of PPE. Otherwise, such items are classified as inventory. Costs to be capitalised Similar to Indian GAAP. However, expenses incurred in the interval when the project is ready to commence commercial production and when it actually commences production may also be required to be capitalised. The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, shall be capitalised as an indirect element of the construction cost. If the interval between the date a project is ready to commence commercial production and the date at which commercial production actually begins is prolonged, all expenses incurred during this period are charged to the profit and loss statement. However, the expenditure incurred during this period is also sometimes treated as deferred revenue expenditure to be amortised over a period not exceeding 3 to 5 years after the commencement of commercial production Directly attributable costs may be capitalised only until the asset is capable of operating in the manner intended by management . If an asset is purchased or constructed and can operate in that manner immediately, costs incurred whilst the asset is standing idle may not be capitalised Replacement costs Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to actual cost. Replacement cost of an item of property, plant and equipment is generally expensed when incurred. Only expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is capitalised. From financial years commencing on or after 1 April 2015, Schedule II mandates fixed assets to be componentised for the purposes of depreciation and therefore, the position will be similar to that under Ind AS. Replacement cost of an item of property, plant and equipment is capitalised if replacement meets the recognition criteria. Carrying amount of items replaced is derecognised Revaluation Not covered by ICDS. However, under the Act, income / expense recognised only on actual realisation No specific requirement on frequency of revaluation. If an entity adopts the revaluation model, revaluations are required to be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Depreciation Depreciation on a tangible fixed asset shall be computed in accordance with the provisions of the Act and the Rules thereunder AS 10 does are not require assets to be componentised and depreciated separately, although it states that such an approach may improve the accounting for an item of fixed asset. Schedule II to the Companies Act, 2013 sets out the useful lives based on the nature of assets and the useful life should not ordinarily be different from the life specified in the Schedule. However, a different useful life may be used if such difference is disclosed and a justification, backed by technical advice, is provided in this behalf. Schedule II also mandates fixed assets to be componentised for depreciation purposes (componentisation is mandatory in respect of financial years commencing on or after 1 April 2015). Property, plant and equipment are componentised and are depreciated separately. There is no concept of minimum statutory depreciation under Ind AS. Change in method of depreciation Not covered by ICDS. However, change in accounting policy such as change in method of depreciation can be made only when there is a reasonable cause under ICDS I. Requires retrospective re-computation of depreciation and any excess or deficit on such re- computation is required to be adjusted in the period in which such change is effected. Such a change is treated as a change in accounting policy and its effect is quantified and disclosed. Changes in depreciation method are considered as change in accounting estimate and applied prospectively.