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AS 10 Accounting For Fixed Assets Revised Notes

AS 10 Accounting For Fixed Assets Revised Notes. In the previous article, we have given the complete details of AS 2 Valuation of Inventory and A.S 6 (Depreciation)Today we are providing the full details of Accounting Standard – 10 revised summary notes. In this article, you can get the definition of fixed asset, applicability, non-applicability, the cost of fixed asset includes, which things should be deducted from cost of fixed asset and accounting treatment of revaluation. This notes is useful to CA IPCC students.

AS 10 Accounting For Fixed Assets Revised Notes

Accounting Standard Fixed Assets AS 10

Fixed Asset :

It is an asset held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business. (It is expected to be used for more than one accounting period.)

Non-Applicability :

This statement does not deal with the specialized aspects of accounting for fixed assets that arise under a comprehensive system reflecting the effects of changing prices but applies to financial statements prepared on historical cost basis.

This statement does not deal with accounting for the following items to which special considerations apply:

(i) forests, plantations and similar regenerative natural resources;

(ii) wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources;

(iii) expenditure on real estate development; and

(iv) livestock. Expenditure on individual items of fixed assets used to develop or maintain the activities covered in (i) to (iv) above, but separable from those activities, are to be accounted for in accordance with this Statement.

This statement does not cover the allocation of the depreciable amount of fixed assets to future periods since this subject is dealt with in Accounting Standard 6 on ‘Depreciation Accounting’.

This statement does not deal with the treatment of government grants and subsidies, and assets under leasing rights. It makes only a brief reference to the capitalisation of borrowing costs and to assets acquired in an amalgamation or merger. These subjects require more extensive consideration than can be given within this Statement.

The cost of fixed asset includes:

  • Purchase price
  • Import Duties and other non-refundable taxes
  • Direct cost incurred to bring the asset to its working condition
  • Installation cost
  • Professional fees like fees of architects
  • General overhead of enterprise when these expenses are specifically attributable to acquisition/preparation of fixed assets
  • Any expenses before the commercial production, including cost of test run and experimental production
  • Any expenses before the asset is ready for use not put to use
  • Loss on deferred payment arising out of foreign currency liability
  • Price adjustment, changes in duties and similar factors.

The cost of fixed asset is deducted with:

  • Trade discounts and rebates
  • Sale proceeds of test run production
  • Amount of government grants received/receivable against fixed assets (See AS- 12)
  • Gain on deferred payment arising out of foreign currency liability.

Cases :

a)When fixed asset is acquired in exchange for another asset, the cost of the asset acquired should be recorded

  • either at, fair market value
  • or at, the net book value of the assets given up

b)When asset is self-constructed

If asset is constructed in house and not purchased from the outside market, it is called self-constructed asset. Cost of such asset shall include following.

  • Any cost directly attributable to the asset
  • Any common cost or expense for construction of such asset should include after making proper allocation between the assets to which it relates.
  • If any internal profit included in normal course of business should be reduced or not to include in cost of asset.

c)Fixed Assets acquired in exchange for shares or other securities should be recorded at FMV of assets given up or asset acquired, whichever is more clearly evident. (i.e the option of recording the asset at net book value of asset given up is closed).

d)In case of hire purchase transaction, asset should be recorded at its cash price.

Subsequent expenditures related to an item of fixed asset should be added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Revaluation : When the fixed assets are revalued, these assets are shown at revalued price. Revaluation of fixed assets should be restricted to the net recoverable amount of fixed asset. When a fixed asset is revalued, an entire class of assets should be revalued or selection of assets for revaluation should be made on a systematic basis. That basis must be disclosed.

Repairs and Maintenance of assets

If any asset is repaired during its useful life, such cot or expense should be recorded according to the nature of its expense which are as follow.

  • If expense makes improvement or increase capacity of asset it should be included in the book value of asset.
  • If expense is routine part of its life & not making any improvement in useful life or capacity of asset it should be charged to profit & loss account and not to add in asset’s value.

Accounting treatment of revaluation under different situation:

When revaluation is made upward

Fixed Assets A/c Dr
To Revaluation Reserve

When revaluation is made downward

P&L A/c Dr
To Fixed Assets

When revaluation is made upward subsequent to previous upward revaluation

Fixed Assets A/c Dr
To Revaluation Reserve

When revaluation is made downward subsequent to previous upward revaluation

Revaluation Reserve A/c Dr (To the extent of carrying amount of R.R)
P&L A/c Dr (Balancing Figure)
To Fixed assets

When revaluation is made upward subsequent to previous downward revaluation

Fixed assets A/c Dr
To P&L A/c (To the extent of previous downward revaluation)
To Revaluation Reserve (Balancing Figure)

When revaluation is made downward subsequent to previous downward revaluation

P& L A/c Dr
To Fixed Assets

Accounting treatment on disposal of Fixed Assets: On sale of fixed assets

Bank A/c Dr
P & L A/c Dr (If Loss)
To Fixed Assets
To P & L A/c (If Profit)

Retirement or Disposal

Once an asset is disposed, it is removed from the financial statements. When however, an asset is no longer expected to be used and awaiting disposal, it cannot be removed from the books. It is stated at lower of net realisable value and net book value. The expected loss has to be recognised in the profit and loss account immediately and a separate disclosure made in the financial statements.

Sometimes assets can be re-valued at some point and a revaluation reserve created for the same. When such assets are disposed, the difference between the net proceeds and net book value is set off first against any credit lying in the revaluation reserve. After such adjustment the unutilised credit in the revaluation reserve has to be transferred to general reserve.


  • Gross and net book value of fixed assets at the beginning and end of period showing additions and disposals
  • Revalued amounts substituted for historical costs of fixed assets, the method adopted to compute the same and whether an external valuer was involved.

Click Here to download AS 10 accounting for fixed assets notes by ICAI.

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