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Reply from SAP_EZ on Apr 7 at 10:23 PM If the inauguration date is the first date the building was used in operations, then May 15th.
This is because the asset is now providing the future benefits of prior costs incurred. In theory we spread the recognition of asset costs (hitting the income statement) over the periods during which the building helps generate revenue. This is the matching principle of recognizing revenues and costs of revenues in the same periods. So, the in-service date of the asset with the caveat there are no remaining significant/material costs yet to be incurred.
If your process varies from a more theoretically superior method - it is important to be consistent in your processes, as you can still avoid audit findings through consistency of following documented processes. Regards
| | | ---------------Original Message---------------
From: CHITTI
Sent: Saturday, April 07, 2012 6:39 AM
Subject: Date from Which Depreciation is to Be Calculated
Our Company unit has paid advances to a Govt. builder for constructing Cellar plus 2 floors. The advances were paid over a period of two years. The building was handedover after completing in all respects on 1st April. However, no document is produced by the Builder while handing over the premises. The building was inaugurated on 15th May, 2010. The Builder has submitted his bill during November, 2010. Which date should our Company take for calculating depreciation. |
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