04-30-2007, 04:52 PM
Dear,
Although not strictly applicable in your situation, still IAS 20 can provide a basic guideline to resolve the issue. IAS 20 pertains to accounting for the government grants.
You can capitalize/account for the asset at its fair value in your books of account by crediting DEFERRED CREDIT account. You will charge depreciation on the said asset as per your accounting policy. Every year, exactly an equal figure (to depreciation expense) would be amortized from DEFFERED CREDIT and accounted for as income in your profit and loss account. This way your depreciation expense would be set off against the amortization income. Balances of the asset and deferred credit both will be reduced every year with equal figures of depreciation charged and amortization booked.
The other solution is to account for the asset in your FIXED ASSETS REGISTER with out any amount as free of cost and do not pass any journal entry.
Third solution is required in those cases where fixed assets registers do not intake the entries without an amount. In this case you can account for the asset at a nominal value of Re. 1 only by crediting your Other Income account. This will help keeping a monitory control over the asset as it will appear in accounting record as well.
However, I recommend the first solution that is based upon the guidelines of IAS 20.
Regards,
Kamran.
Although not strictly applicable in your situation, still IAS 20 can provide a basic guideline to resolve the issue. IAS 20 pertains to accounting for the government grants.
You can capitalize/account for the asset at its fair value in your books of account by crediting DEFERRED CREDIT account. You will charge depreciation on the said asset as per your accounting policy. Every year, exactly an equal figure (to depreciation expense) would be amortized from DEFFERED CREDIT and accounted for as income in your profit and loss account. This way your depreciation expense would be set off against the amortization income. Balances of the asset and deferred credit both will be reduced every year with equal figures of depreciation charged and amortization booked.
The other solution is to account for the asset in your FIXED ASSETS REGISTER with out any amount as free of cost and do not pass any journal entry.
Third solution is required in those cases where fixed assets registers do not intake the entries without an amount. In this case you can account for the asset at a nominal value of Re. 1 only by crediting your Other Income account. This will help keeping a monitory control over the asset as it will appear in accounting record as well.
However, I recommend the first solution that is based upon the guidelines of IAS 20.
Regards,
Kamran.
