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Editorial Board on Accounts and Audit
  • Leasehold Land-Amortisation

    by LALIT on Wednesday, December 13, 2017 at 03:43 PM

    Land taken on lease for 50 & 90 years from authorities. Whether amount incurred for purchase of leasehold land can be depreciated/amortised over the tenure of lease and under what legal provisions? If not amortised/depreciated, whether the auditor has to make any reference in the Statutory Audit Report?

    Replied byEditorial Board Saturday, December 16, 2017 at 05:45 PM

    The land in your question should be treated as Property, Plant & Equipment (PPE) under AS 10.

    As per para 17 of AS 10, the cost of an item of PPE comprises amount incurred on purchase, and directly attributable costs incurred to make capable the item of PPE to use it in the manner intended by the management, etc.

    Therefore, the cost incurred to purchase leasehold land should be treated as PPE and amortised over the tenure of lease on a systematic basis.

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