Accounting of Pre-construction Expense Pending Fund Approval From Parent Company Under Ind AS Framework
- News|Blog|Account & Audit|
- < 1 minute
- By Taxmann
- |
- Last Updated on 25 June, 2024
Latest from Taxmann
A Ltd. herein referred to as “the company” is engaged in the business of crude oil. The company is subsidiary of Oil Industry Development Board (OIDB). To enhance its storage capacity, company plans to construct strategic crude oil storages. The construction cost were provided by parent company. The company has estimated that construction expense would amount to Rs. 20 crore. However, on execution of project the cost of construction got escalated to Rs. 25 crore and company could disburse only Rs. 20 crore as the parent company has only released the payment of 20 crore.
The fund received from parent is accounted as grant income in the Statement of Profit and Loss on a systematic basis over the periods in which the company recognises the expense incurred. However, the company failed to understand the accounting of balance 5 crore as there no certainty regarding source of funds and receipt of funds. Thus, the company did not account the liability for the unpaid invoices of Rs. 5 crore. To correctly account the aforesaid transaction company sought the opinion of Expert Advisory Committee of ICAI.
To understand the accounting treatment suggested by EAC on pre-construction expense for which fund approval is pending from parent company.
Click Here To Read The Full Story
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
