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Finance & Accounting
Pages 8 (2008 words)
The important thing to consider at the time of recognition of fixed asset is the identification of the relevant cost based on which the asset should be capitalized in the balance sheet of the company.
nce sheet of the company. The cost include cost incurred at the time of purchase of asset such as cash payment for the acquisition of assets, duty paid on the import of assets at the time of import, transportation cost incurred for bringing the asset to the desired location and place. Although, there might be cost incurred related to the acquisition of the assets but it might not be relevant and thus not capitalized. Examples of such cost are cost of opening a new production facility, cost of advertising and promotional activities and other indirect and administrative costs. The capitalization of the cost is stopped when the asset is the location or place for the intended use. Cost such as initial operating losses, initial cost incurred by the company when it is operating below the capacity and cost or relocation or reorganization of some or all of the holdings of the company, is also not capitalized. ...
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