Capitalizing Infrastructure Expenditures Under AS 10 | Determining When to Classify as CWIP or PPE

This document examines the classification of infrastructure-related expenditures incurred by a not-for-profit entity operating under the ownership of a State Government. The entity receives capital grants from the Government of India and the State Government, which are utilized for infrastructure development, such as roads, electricity, sewage treatment, and waste management facilities. The expenditures were initially recorded as Capital Work in Progress (CWIP) until the end of the 2021-22 financial year.

However, during a 2023 audit, the Comptroller and Auditor General (C&AG) questioned whether these expenditures should instead be recognized as Property, Plant, and Equipment (PPE) under AS 10. The company maintains that the classification aligns with the “unit of measure” approach, where entire projects rather than individual assets are considered for capitalization.

This study provides insights into the standards for classification under AS 10 and the implications of timing in capitalizing such infrastructure expenditures.

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