Accounting Standard for Fixed Assets (AS 10)

(a) The gross book value of a fixed asset should be either historical cost or a revaluation
computed in accordance with the Accounting Standard. [Set out in paragraphs 20 to 26
and 27 to 32 of the Standards]
(b) The cost of a fixed asset should comprise its purchase price and any attributable cost
of bringing the asset to its working condition. Financing costs relating to deferred
credits or to borrowed funds attributable to construction or acquisition of fixed assets
should also be included in the gross book value of the asset to which they relate.
However, the financing costs (including interest) on fixed assets purchased on a
deferred credit basis or moneys borrowed for construction or acquisition of fixed
assets should not be capitalised. Thus, the installation cost for a machine should be
added to its value. But any interest paid on a loan taken to buy the machine should
not enhance the value of machine.
(c) In case of any self-constructed assets, costs attributable to its construction and allocable
to it, should be included in its value.
(d) Materials items retired from active use and held for disposal should be shown separately
in the financial statements and stated at net book value or realizable value,
whichever is lower.
(e) If any subsequent expenditure causes an addition to the already expected future benefits
of an asset, such expenditure should be added with the value of the asset.
(f) In case a new asset is acquired in part exchange of an old asset the exchange price
should be recorded at fair market value or net book value of the old asset.
(g) Fixed asset acquired in exchange of shares, etc. should be recorded at its fair market
value or the fair market value of the shares, etc. whichever is lower.
(h) Any loss or gain on the retirement or disposal of any fixed asset carried at cost should
be recognised in the profit and loss account.

(i) If the value of any asset increases on revaluation, its accumulated depreciation should
not be debited to Profit & Loss Account. The depreciation on such revalued amount
should be adjusted against revaluation reserves.
(j) Any fixed asset purchased under hire purchase should be recorded at its Cash Price
showing appropriate narration that its full ownership has not been received.
(k) All direct costs incurred in developing the patents should be capitalised and written off
over their legal term of validity or over their working life, whichever is shorter.
(l) Amount paid for know-how of the plants, layout or designs of buildings, machinery,
etc. should be added with the respective value of the asset. Depreciation should be
provided on the total value. However, if such amounts have been paid compositely
both for manufacturing process and for assets, the management should reasonably
allocate the composite cost.
(o) The following information should be disclosed in the financial statements :
(1) Gross and net book values of fixed assets at the beginning and end of an accounting
period disclosing additions, disposals, acquisitions and other movements;
(2) Expenditure incurred on account of used assets in the course of acquisition or
construction; and
(3) Revalued amounts substituted for historical costs of fixed assets and necessary
particulars regarding the process adopted for revaluation.