Accounting treatment of dredging and shoal expenditure at the riverbank for ensuring water supply to the refinery
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- Last Updated on 22 October, 2022
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Para 16 of Ind AS 16 ‘Property, Plant and Equipment states that the cost of an item of property, plant and equipment comprises:
(a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
(c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
Hence, if the expenditure on dredging and removal of shoal activities is necessarily required to be incurred by the Company to resume the construction of the refinery and to ensure uninterrupted water supply to the refinery, which is required for the future operation of the refinery then the activity of dredging and removal of shoal from the river shall be considered as a condition necessary for undertaking the project as a whole and it cannot be concluded that the construction work of refinery would have completed independent of or without agreeing to perform such activity.
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