Neelashree Chp 1 to 5 Final( 2)

8/11/2019 Neelashree Chp 1 to 5 Final( 2)

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A Study on Fixed Asset Management

AIMS, PEENYA Page 1

Chapter 1

Introduction

ABOUT INDUSTRY

The Electronics Industry in India took off around 1965 with an orientation towards

space and defence technologies. This was rigidly controlled and initiated by the

government. This was followed by developments in consumer electronics mainly with

transistor radios, Black & White TV, Calculators and other audio products. Color

Televisions soon followed. In 1982-a significant year in the history of television in India

- the government allowed thousands of colour TV sets to be imported into the country to

coincide with the broadcast of Asian Games in New Delhi. 1985 saw the advent of

Computers and Telephone exchanges, which were succeeded by Digital Exchanges in

1988. The period between 1984 and 1990 was the golden period for electronics during

which the industry witnessed continuous and rapid growth.

From 1991 onwards, there was first an economic crises triggered by the Gulf War which

was followed by political and economic uncertainties within the country. Pressure on the

electronics industry remained though growth and developments have continued with

digitalization in all sectors, and more recently the trend towards convergence of

technologies.

After the software boom in mid 1990s India's focus shifted to software. While the

hardware sector was treated with indifference by successive governments. Moreover the

steep fall in custom tariffs made the hardware sector suddenly vulnerable to international

competition. In 1997 the ITA agreement was signed at the WTO where India committed

itself to total elimination of all customs duties on IT hardware by 2005.

CURRENT SCENARIOIn recent years the electronic industry is growing at a brisk pace. It is currently worth

US$ 32 Billion and according to industry estimates it has the potential to reach US$ 150

billion by 2010. The largest segment is the consumer electronics segment. While is

largest export segment is of components. The electronic industry in India constitutes just


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0.7 per cent of the global electronic industry. Hence it is miniscule by international

comparison. However the demand in the Indian market is growing rapidly and

investments are flowing in to augment manufacturing capacity.

The output of the Electronic Hardware Industry in India is worth US$11.6 Billion at

present. India is also an exporter of a vast range of electronic components and products

for the following segments

Display technologies

Entertainment electronics

Optical Storage devices

Passive components

Electromechanical components Corporate Catalyst India A report on Indian Electronics

Industry

Telecom equipment

Transmission & Signaling equipment

Semiconductor designing

Electronic Manufacturing Services (EMS)

This growth has attracted global players to India and leaders like Solectron, Flextronics,

Jabil, Nokia, Elcoteq and many more have made large investments to access the Indian

market. In consumer electronics Korean companies such as LG and Samsung have made

commitments by establishing large manufacturing facilities and now enjoy a significant

share in the growing market for products such as Televisions, CD/DVD Players, Audio

equipment and other entertainment products. The growth in telecom products demand has

been breathtaking and India is adding 2 million mobile phone users every month! With

telecom penetration of around 10 per cent, this growth is expected to continue at least

over the next decade. Penetration levels in other high growth products are equally high

and growth in demand for Computer/ IT products, auto electronics, medical, industrial, as

well as consumer electronics is equally brisk. Combined with low penetration levels and

the Indian economy growing at an impressive 7 per cent per annum, the projection of a

US$150 Billion+ market is quite realistic and offers an excellent opportunity to

electronics players worldwide.


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India is well-known for its software prowess. But on the hardware front, the progress is

rather slow. However, the country has been making gains in this sector also. Already, 50

Electronics Manufacturing Services (EMS)/Original Design Manufacturers (ODMs)

providers are operating in India.

Meaning of asset

Assetis the one used by theInternational Accounting Standards Board.The following is

a quotation from the IFRS Framework: "An asset is a resource controlled by the

enterprise as a result of past events and from which future economic benefits are expected

to flow to the enterprise." Theaccounting equation is the mathematical structure of

thebalance sheet.It relates assets, liabilities, andowner's equity:

Assets = Liabilities + Capital (where Capital for a corporation equals Owner's

Equity)

Infinancial accounting,an assetis an economic resource. Anything tangible or intangible

that is capable of being owned or controlled to produce value and that is held to have

positiveeconomic value is considered an asset.

Two major asset classes aretangible assets andintangible assets.

Tangible assets contain various subclasses, including current assets and fixed assets.

Current assets include inventory, while fixed assets include such items

asbuildings andequipment.

Intangible assets are nonphysical resources and rights that have a value to the firm

because they give the firm some kind of advantage in the market place.

Examples of intangible assets aregoodwill,copyrights,trademarks,patents andcomputer

programs, and financial assets, including such items asaccounts

receivable,bonds andstocks.
http://en.wikipedia.org/wiki/International_Accounting_Standards_Boardhttp://en.wikipedia.org/wiki/Accounting_equationhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Tangible_propertyhttp://en.wikipedia.org/wiki/Intangible_assetshttp://en.wikipedia.org/wiki/Buildingshttp://en.wikipedia.org/wiki/Capital_equipmenthttp://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/Copyrightshttp://en.wikipedia.org/wiki/Trademarkshttp://en.wikipedia.org/wiki/Patentshttp://en.wikipedia.org/wiki/Computer_programhttp://en.wikipedia.org/wiki/Computer_programhttp://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Computer_programhttp://en.wikipedia.org/wiki/Computer_programhttp://en.wikipedia.org/wiki/Patentshttp://en.wikipedia.org/wiki/Trademarkshttp://en.wikipedia.org/wiki/Copyrightshttp://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/Capital_equipmenthttp://en.wikipedia.org/wiki/Buildingshttp://en.wikipedia.org/wiki/Intangible_assetshttp://en.wikipedia.org/wiki/Tangible_propertyhttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Accounting_equationhttp://en.wikipedia.org/wiki/International_Accounting_Standards_Board


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Meaning of fixed asset management.

Fixed assets management is anaccountingprocess that seeks to trackfixed assets for

the purposes offinancial accounting,preventive maintenance,andtheft deterrence. Fixed

asset management is a part ofasset managementthat involvesasset management softwarealso.

Organizations face a significant challenge to track the location, quantity, condition,

maintenance anddepreciation status of their fixed assets. A popular approach to tracking

fixed assets uses serial numbered Asset Tags, which arelabels often withbar codes for

easy and accurate reading. Periodically, the owner of the assets can take inventory with a

mobilebar code reader and then produce a report.

Off-the-shelf software packages for fixed asset management are marketed to businesses

small and large. Some Enterprise Resource Planning systems are available with fixed

assets modules.

Some tracking methods automate the process, such as by using fixed scanners to read bar

codes onrailwayfreight cars or by attaching aradio-frequency identification (RFID) tag

to an asset.

FIXED ASSETS MEANING.

Fixed assets are long lived assets in the sense that they provide enduring benefits to the

entity. An enterprise holds a fixed asset (property, plant and equipment, or intangible

assets) for use in production and supply of goods or services, for rental or for

administrative purposes on a continuing basis. It expects to use a fixed asset for more

than one accounting period and does not intend to sell the same in the normal course of

business. Examples of fixed assets are land, building, plant and equipment, furniture and

fixtures, vehicles, goodwill, and patent. Disposal of fixed asset on retirement is a

peripheral activity.
http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Fixed_assethttp://en.wikipedia.org/wiki/Financial_accountinghttp://en.wikipedia.org/wiki/Preventive_maintenancehttp://en.wikipedia.org/wiki/Thefthttp://www.assetmanagement123.com/index.htmlhttp://www.assetmanagement123.com/asset-management-software.htmlhttp://en.wikipedia.org/wiki/Depreciationhttp://en.wikipedia.org/wiki/Labelshttp://en.wikipedia.org/wiki/Bar_codeshttp://en.wikipedia.org/wiki/Bar_code_scannerhttp://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/Railwayhttp://en.wikipedia.org/wiki/Freight_carhttp://en.wikipedia.org/wiki/Radio-frequency_identificationhttp://en.wikipedia.org/wiki/Radio-frequency_identificationhttp://en.wikipedia.org/wiki/Freight_carhttp://en.wikipedia.org/wiki/Railwayhttp://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/Bar_code_scannerhttp://en.wikipedia.org/wiki/Bar_codeshttp://en.wikipedia.org/wiki/Labelshttp://en.wikipedia.org/wiki/Depreciationhttp://www.assetmanagement123.com/asset-management-software.htmlhttp://www.assetmanagement123.com/index.htmlhttp://en.wikipedia.org/wiki/Thefthttp://en.wikipedia.org/wiki/Preventive_maintenancehttp://en.wikipedia.org/wiki/Financial_accountinghttp://en.wikipedia.org/wiki/Fixed_assethttp://en.wikipedia.org/wiki/Accounting


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Fixed assets may be tangible or in tangible.

Assets acquired for safety and environmental reasons qualify as fixed assets. Although

they may not directly increase future economic benefits, they help the entity to obtain

future economic benefits from other fixed assets.

A fixed asset is carried at cost less accumulated depreciation and accumulated

impairment loss. The depreciable amount, that is, the cost less estimated residual value

of the asset, is allocated over the estimated useful life of the asset.

Impairment lossoccurs when the asset is unable to recover its carrying amount. In this

situation, the carrying amount of the asset is reduced to the recoverable amount and the

difference between the carrying amount and the recoverable amount is recognized as

impairment loss. The recoverable amount becomes the new carrying amount.

DEFINITIONS

The following terms are used in this statement with their meanings specified:

Fixed asset 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.

Fair market value is the price that would be agreed in an open and unrestricted

market between knowledgeable and willing parties dealing at arms length who are fully

informed and are not under any compulsion to transact.

Gross book value of a fixed asset is its historical cost or other amount substituted

for historical cost in the books of account or financial statements. When this amount is

shown net of accumulated depreciation, it is termed as net book value.

EXPLANATION

Fixed assets often comprise a significant portion of the total assets of an enterprise, and

therefore are important in the presentation of financial position. Furthermore, the


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determination of whether expenditure represents an asset or an expense can have a

material effect on an enterprises reported results of operations.

IDENTIFICATION OF FIXED ASSETS

The above definition gives criteria for determining whether items are to be

classified as fixed assets. A judgment is required in applying the criteria to specific

circumstances or specific types of enterprises. It may be appropriate to aggregate

individually insignificant items, and to apply for the criteria to the aggregate value. An

enterprise may decide to expense an item which could otherwise have been included as

fixed assets, because the amount of the expenditure is not material.

Stand-by equipment and servicing equipment are normally capitalized. Machinery

spares are usually charged to the profit and loss statement when consumed. However, if

such spares can be used only in connection with an item of fixed assets and their use is

expected to be irregular, it may be appropriate to allocate the total cost on a systematic

basis over a period not exceeding the useful life of the principal item.

In certain circumstances, the accounting for an item of fixed asset may be

improved if the total expenditure thereon is allocated to its component parts, provided

they are in practice separable, and estimates are made of the useful lives of these

components. For example, rather than treat an aircraft and its engines as one unit, it maybe better to treat the engines as a separate unit if it is likely that their useful life is shorter

than that of the aircraft as a whole.

COMPONENTS OF COST

The cost of an item of fixed assets comprises its purchase price, including import

duties and other non-refundable taxes of levies and any directly attributable cost of

bringing the asset to its working condition for its intended use; any trade discounts and

rebates are deducted in arriving at the purchase price.

Example: Determination of cost of fixed asset


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Details Amount(Rs.) Amount(Rs)

Invoice price-Net 55,00,000

Less:CENVAT credit availability 4,00,000 51,00,000

Add: Transportation charges to

factory site.

25,000

Add: Special foundation and

installation charges

75,000

Cost of the machine 52,00,000

(Source: Financial accounting management by Ambharish Gupta)

Examples of directly attributable costs are:

Site preparation;

Initial delivery and handling costs;

Installation cost, such as special foundations for plant; and

Professional fees, for example fees of architects and engineers.

The cost of a fixed asset may undergo changes subsequent to its acquisition or

construction on account of exchange fluctuations, price adjustments, and changes induties or similar factors.

F inancing costs relating to deferred creditors or to borr owed fundsattributable to

construction or acquisition of fixed assets for the period up to the completion of

construction or acquisition of fixed assets are also sometimes included in the

gross book value of the asset to which they relate. However, financing costs

(including interest) on fixed assets purchased on a deferred credit basis or on

monies borrowed for construction or acquisition of fixed assets are not capitalized

to the extent that such costs relate to periods after such assets are ready to be put

to use.


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Admini stration and other general overhead expensesare usually excluded from

the cost of fixed assets because they do not relate to a specific fixed asset.

However, in some circumstances, such expenses as are specifically attributable to

construction of a project or to the acquisition of a fixed asset or bringing to its

working condition, may be included as a part of the cost of the construction

project or as a part of the cost of the fixed asset.

The expenditure incurred on start-up and commissioning of the project, including

the expenditure incurred on test runs and experimental production, is usually

capitalized as an indirect element of the construction cost. However, the

expenditure incurred after the plant has begun commercial production, i.e.,

production intended for sale or captive consumption, is not capitalized and is

treated as revenue expenditure even though the contract may stipulate that the

plant will not be finally taken over until after the satisfactory completion of the

guarantee period.

If the interval between the dates of a project is ready to commence commercial

production and the date at which commercial production actually begins is

prolonged, all expenses incurred during this period are charged to the profit and

loss statement. However, the expenditure incurred during this period is also

sometimes treated as deferred revenue expenditure to be amortized over a period

not exceeding 3 to 5 years after the commencement of commercial production.

SELF-CONSTRUCTED FIXED ASSETS

In arriving at the gross book value of self-constructed fixed assets, the same

principles apply as those described in above lines. Included in the gross book value are

costs of construction that relate directly to the specific asset and cost that are attributable

to the construction activity in general and can be allocated to the specific asset. Any

internal profits are eliminated in arriving at such costs.


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NON-MONETARY CONSIDERATION

1.When a fixed asset is acquired in exchange for another asset, its cost is usually

determined by reference to the fair market value of the consideration give. It

may be appropriate to also consider the fair market value of the asset acquired if

this is more clearly evident. An alternative accounting treatment that is

sometimes used for exchange of assets, particularly when the assets exchanged

are similar is to record the asset acquired at the net book value of the asset given

up. In each case an adjustment is made for any balancing receipt or payment of

cash or other consideration.

2.When a fixed asset is acquired in exchange for shares or other securities in the

enterprise, it is usually recorded at its fair market value, or the fair market value

of the secur it ies issued, whichever is more clearly evident.

IMPROVEMENTS AND REPAIRS

Frequently, it is difficult to determine whether subsequent expenditure related to

fixed assets represents improvements that ought to be added to the gross book

value or repairs that ought to be charged to the profit and loss statement. Only

expenditure that increases the future benefits from the existing asset beyond its

previously assessed standard at performance is included in the gross book value.

E.g. an increase in capacity.

The cost of an addition or extension to an existing asset which is of a capital nature

and which becomes an integral part of the existing asset is usually added to its

gross book value. An addition of extension which has a separate identity and is

capable of being used after the existing asset is disposed of, is accounted for

separately.

AMOUNT SUBSTITUTED FOR HISTORICAL COST


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Sometimes financial statements that are otherwise prepared on a historical cost

basis include part or all of fixed assets at a valuation in substitution for historical

costs and depreciation is calculated accordingly. Such financial statements are to

be distinguished from financial statements prepared on a basis intended to reflect

comprehensively the effects of changing prices.

A commonly accepted and preferred method of restating fixed assets is by

appraisal, normally undertaken by competent values. Other methods sometimes

used are indexation and reference to current prices which when applied is cross-

checked periodically by appraisal method.

The revalued amounts of fixed assets are presented in financial statements, either

by restating both the gross book value and accumulated depreciation so as to give

a net book value equal to the net revalued amount or by restating the net book

value by adding there in the net increase on account of revaluation. An upward

revaluation does not provide a basis for crediting to the profit and loss statement

the accumulated depreciation

Existing at the date of revaluation

Different bases of valuation are sometimes used in the same financial statements to

determine the book value of the separate items within each of the categories of

fixed assets or for the different categories of fixed assets. In such cases, it is

necessary to disclose the gross book value included on each basis.

Selective revaluation of assets can lead to unrepresentative amounts being reported

in financial statements. Accordingly, when revaluations do not cover all the

assets of a given class, it is appropriate that the selection of assets to be revalued

be made on a systematic basis. For example: an enterprise may revalue a whole

class of assets within a unit.

It is not appropriate for the revaluation of a class of assets to result in the net book

value of that class being greater than the recoverable amount of the assets of that

class.


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An increase in net book value arising on revaluation of fixed assets is normally

credited directly to owners interests under the heading of revaluation reserves

and is regarded as not available for distribution.

An decrease in net book value arising for revaluation of fixed assets is charged to

profit and loss statement expect that, to the extent that such a decrease is

considered to be related to a previous increase on revolution that is included in

revaluation reserve, it is sometimes charged against that earlier increase. It

sometimes happens that an increase to be recorded is a reversal of a previous

decrease arising on revaluation which has been charged to profit and loss

statement in which case the increase is credited to profit and loss statement to the

extent that it offsets the previously recorded decrease.

RETIREMENTS AND DISPOSALS

An item of fixed asset is eliminated from the financial statements on disposal.

Items of fixed assets that have been retired from active use and are held for

disposal are stated at the lower of their net book value and net realizable value

and are shown separately in the financial statements. Any expected loss is

recognized immediately in the profit and loss statement.

In historical cost financial statements, gains or losses arising on disposal are

generally recognized in the profit and loss statement.On disposal of a previously revalued item of fixed asset, the difference between

net disposal proceeds and the net book value is normally charged or credited to

the profit and loss statement except that, to the extent such a loss is related to an

increase which was previously recorded as a credit to revaluation reserve and

which has not been subsequently reversed or utilized, it is charged directly to that

account. The amount standing in revaluation reserve following the retirement or

disposal of an asset which relates to that asset may be transferred to general

reserve.

VALUATION OF FIXED ASSETS IN SPECIAL CASES


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In the case of fixed assets acquired on hi re purchase terms, although legal

ownership does not vest in the enterprise, such assets are recorded at their cash

value, which if not readily available, is calculated by assuming an appropriate rate

of interest. They are shown in the Balance Sheet with an appropriate narration to

indicate that the enterprise does not have full ownership thereof.

If the enterprise owns fixed assets jointly with others(otherwise than as a partner in

a firm), the extent of its share in such assets and the proportion in the original

cost, accumulated depreciation and written-down value are stated in the Balance

Sheet. Alternatively, the pro rata cost of such jointly owned assets is grouped

together with similar fully owned assets. Details of such jointly owned assets are

indicated separately in the fixed assets register.

E.g.: JOINTLY OWNED FIXED ASSETS

JOINTLY OWNED FIXED ASSETS

(Rs.lakhs)

Gross Block as at

31.3.02

Total depreciation

and Amortization up

to 31.3.02

W.D.V. as at

31.3.02

Total fixed

assets of the

company

2,974,061.06 1,096,081.90 1,877,979.16

Details of the companys share of jointly owned assets included above.

(Rs.Lakhs)

Assets

particulars

Name of the

joint owners

Original

cost

Accumuated

depreciaion&

amortization

W.D.V. as at

31.3.02


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Land free hold HPC/IBP 119.02 0.00 119.02

Land-Leasehold BPC/IBP 95.31 10.50 84.81

Buildings HPC 42.54 7.38 35.16

Plant and

machinery

HPC/BPC/IBP/G

SFC/IPCL/ACC/

CSIR

1157.46 304.10 853.36

Transport

equipment

RAILWAYS 18234.86 8875.95 9358.91

Railways sidings HPC/BPC 2243.8

5

592.05 1651.80

Drainage,

Sewage & Water

supply

GSFC 99.4 94.13 4.97

21,992.44 9884.41 12108.03

(Source: Ambharish gupta financial accounting management)

Basket purchase: The several assets are purchased for a consolidated price; the

consideration is apportioned to the various assets on a fair basis as determined by

competent values.

FIXED ASSETS OF SPECIAL TYPES

Goodwill, in general, is recorded in the books only when some consideration in

money or moneys worth has been paid for it. Whenever a business is acquired

for a price (payable either in cash or in shares or otherwise) which is in excess of

the value of the net assets of the business taken over, the excess is termed as

goodwill.

Goodwill arises from business connections, trade name or reputation of an

enterprise or from other intangible benefits enjoyed by an enterprise.


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As a matter of financial prudence, goodwill is written-off over a period. However,

many enterprises do not write-off goodwill and retain it as an asset.

Patents are normally acquired in two ways: (i) by purchase, in which case patents

are valued at the purchase cost including incidental expenses, stamp duty, etc. and

(ii) by development within the enterprise, in which case identifiable costs incurred

in developing the patents are capitalized. Patents are normally written-off over

their legal term of validity or over their working life, whichever is shorter.

Know-how in general is recorded in the books only when some consideration in

money or money worth has been paid for it. Know-how is generally of two types:

Relating to manufacturing process

Relating to plans, designs and drawings of building or plant and machinery

Know-how related to plans, designs and drawings of buildings or plant and

machinery is capitalized under the relevant asset heads. In such cases

depreciation is calculated on the total cost of those assets, including the cost of the

know-how capitalized. Know-how related to manufacturing processes is usually

expensed in the year in which it is incurred.

The amount said for know-how is composite sum in respect of both the types

mentioned in paragraph 16.4; such consideration is apportioned amongst them on

a reasonable basis.The consideration for the supply of know-how is a series of recurring annual

payments as royalties, technical assistance fees, contribution to research, etc.,

such payments are charged to the profit and loss statement each year.

DISCLOSURE

Certain specific disclosures on accounting for fixed assets are already required by

Accounting Standard 1 on Disclosure of Accounting Policies and Accounting

Standard 6 on Depreciation Accounting.


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Further disclosures that are sometimes made in financial statements include:

Gross and net book values of fixed assets at the beginning and end of an

accounting period showing addition, disposals, acquisitions and other movements;

Expenditure incurred on account of fixed assets in the course of construction or

acquisition. Revalued amount substituted for historical cost of fixed assets, the

method adopted to compute the revalued amounts, the nature of any indices used,

the year of any appraisal made, and whether an external value was involved, in

case where fixed assets are stated at revalued amounts.

The items determined in accordance with the above definition of this statement

should be included under fixed assets in financial statements.

The gross book value of a fixed asset should be either historical cost or a

revaluation computed in accordance with this Standard. The method of

accounting for fixed assets included at historical cost and the method of

accounting for revalued assets is set out.

The cost of a fixed asset should comprise its purchase price and any attributable

costs of bringing the asset to its working condition for its intended use. Financing

cost relating to deferred credits or to borrowed funds attributable to construction

or acquisition of fixed assets for the period up to the completion of construction or

acquisition of fixed assets should also be included in the gross book value of the

asset to which they relate. However, the financing costs (including interest) on

fixed assets purchased on a deferred credit basis or on monies borrowed for

construction or acquisition of fixed assets should not be capitalized to the extent

that such costs relate to periods after such assets are ready to be put to use.

The cost of a self-strutted fixed asset should comprise those costs that relate

directly to the specific asset and those that are attributable to the construction

activity in general and can be allocated to the specific asset.

When a fixed asset is acquired in exchange or in part exchange for another asset,

the cost of the asset acquired should be recorded either a fair market value or at

the net book value of the asset given up, adjusted for any balancing payment or

receipt of cash or other consideration. For these purposes fair market value may


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be determined by reference either to the asset given up or to the asset acquired,

whichever is more clearly evident. Fixed asset acquired in exchange for shares or

other securities in the enterprise should be recorded at its fair market value, or the

fair market value of the securities issued, whichever is more clearly evident.

Subsequent expenditure related to an item of fixed asset should be added to its

book value only if it increases the future benefits from the existing asset beyond

its previously assessed standard of performance.

Material items retired from active use and held for disposal should be stated at the

lower of their net book value and net realizable value and shown separately in the

financial statements.

Fixed asset should be eliminated from the financial statements on disposal or when

no further benefit is expected from its use and disposal.

Losses arising from the retirement or gains or losses arising from disposal of fixed

asset which is carried at cost should be recognized in the profit and loss statement.

Fixed asset is revalued in financial statements, an entire class of assets should be

revalued, or the selection of assets for revaluation should be made on a systematic

basis. This basis should be disclosed.

The revaluation in financial statements of a class of assets should not result in the

net book value of that class being greater than the recoverable amount of assets of

that class.

Fixed asset is revalued upwards any accumulated depreciation existing at the date

of the revaluation should not be credited to the profit and loss statement.

An increase in net book value arising on revaluation of fixed assets should be

credited directly to owners interests under the head of revaluation reserve, except that, to

the extent that such increase is related to and not greater than a decrease arising on

revaluation previously recorded as a charge to the profit and loss statement, it may be

credited to the profit and loss statement. A decrease in net book value arising on

revaluation of fixed asset should be charged directly to the profit and loss statement


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except that to the extent that such a decrease is related to an increase which was

previously recorded as a credit to revaluation reserve and which has not been

subsequently reversed or utilized, it may be charged directly to that account.

On disposal of a previously revalued item of fixed asset; the difference between

net disposal proceeds and the net book value should be charged or credited to the

profit and loss statement except that to the extent that such a loss is related to an

increase which was previously recorded as a credit to revaluation reserve and

which has not been subsequently reversed or utilized, it may be charged directly

to that account.

Fixed assets acquired on hire purchase terms should be recorded at their cash

value, which, if not readily available, should be calculated by assuming an

appropriate rate of interest. They should be shown in the Balance Sheet with an

appropriate narration to indicate that the enterprise does not have full ownership

thereof.

In the case of fixed assets owned by the enterprise jointly with others, the extent of

the enterprises share in such assets, and the proportion of the original cost,

accumulated depreciation and written-down value should be stated in the BalanceSheet. Alternatively, the pro rata cost of such jointly owned assets may be

grouped together with similar fully-owned assets with an appropriate disclosure

thereof.

Where several fixed assets are purchased for a consolidated price, the

consideration should be apportioned to the various assets on a fair basis as

determined by competent values.

Goodwill should be recorded in the books only when some consideration in money

or moneys worth has been paid for it. Whenever a business is acquired for a

price (payable in cash or in shares or otherwise) which is in excess of the value of

the net assets of the business taken over, the excess should be termed as

goodwill.


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The direct costs incurred in developing the patent should be capitalized and

written-off over their legal term of validity or over their working life, whichever

is shorter.

Amount paid for know-how for the plans, layout and designs of buildings and/or

design of the machinery should be capitalized under the relevant asset heads, such

as buildings, plants and machinery etc. Depreciation should be calculated on the

total cost of those assets, including the cost of the know-how capitalized. Where

the amount paid for know-how is a composite sum in respect of the

manufacturing process as well as plans, drawings and designs for buildings, plants

and machinery, etc., the management should apportion such consideration into

two parts on a reasonable basis.

DISCLOSURE

The following information should be disclosed in the financial statements:

1)Gross and net book values of fixed assets at the beginning and end of an

accounting period, showing additions, disposals, acquisitions and other

movements;

2)Expenditure incurred on account of fixed assets in the course of construction or

acquisition; and

3)

Revalued amount substituted for historical costs of fixed assets, the method

adopted to compute the revalued amounts, the nature of indices used, the year of

any appraisal made, and whether an external value was involved, in case where

fixed assets are stated at revalued amount.

ACCOUNTING UNDER INDIAN GAAP

SCOPE

AS-10 was issued in November, 1985. It became mandatory from accounting

periods commencing on or after April 1, 1991 for:

Companies governed by the Companies Act, 1956.


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Entities other than sole proprietary concerns/individuals, partnership firms,

societies registered under Societies Registration Act, trusts, Hindu undivided

families and associations of persons.

AS-10 became mandatory for all entities for accounting periods commencing on or after

April 1, 1993. However, it is not applicable to:

Forests, plantations and similar regenerative natural resources

Wasting fixed assets including mineral rights, expenditure on the exploration for or

the extraction of minerals, oil, natural gas and similar non-regenerative resources.

Expenditure on real estate development.

` AS-10 does not deal with intangible fixed assets. Expenditure on individual items

of fixed assets used to develop or maintain activities covered in the given cases but

separable from those activities is accounted for in accordance with AS-10.

NATURE OF FIXED ASSETS

IDENTIFICATION OF FIXED ASSETS

The Standard gives a definition of fixed asset, but does not prescribe specific

criteria for the classification of assets as fixed. Therefore, an enterprise applies judgment

in deciding which assets should be classified as fixed assets, after taking into

consideration its nature of business and specific circumstances.

The Standard permits aggregation of individually insignificant items. Similarly, it

permits an enterprise to expense an item which would otherwise be classified as fixed

assets, because the amount of the expenditure is not material.

STAND BY EQUIPMENT AND SERVICING EQUIPMENT

Stand-by equipment and servicing equipment are fixed assets in their own right.


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For example, a stand-by generator is a separate item of fixed assets.

INSURANCE SPARES

Machinery spares which are used only in connection with an item of fixed asset

and which are expected to be irregularly used are fixed assets. On the other hand,

machinery spares, which are in regular use, form part of inventory. They are charged to

profit and loss account for the period in which they are consumed.

Accounting Standards Interpretation (ASI)-2 explains that whether or not to capitalize

machinery spares depends on the facts and circumstances of each case. For example, a

special pump (which can be used only in specific equipment) should not be classified as

inventory if its use is irregular.Entities purchase certain critical spares along with sophisticated equipment to minimize

idle time due to breakdown. Those spares are usually proprietary items and are available

only with the manufacturer of the equipment. They cannot be used with any other

equipment and their use is irregular. These spares are known as insurance spares.

COMPONENT ACCOUNTING

Where several fixed assets are purchased for a consolidated price, the

consideration should be apportioned to various assets on a fair basis, as determined by

competent valuers.

Similarly, separable components of an asset should be recognized separately if;

Their useful lives are different

They provide benefits to the entity in a different pattern.

Examples of this are the separate recognition of an aircraft and its engine, or the separate

recognition of components of a ropeway. For the former, the useful life of the engine is

usually different from the useful life of the aircraft; therefore, separate recognition of the

engine and the aircraft improves the estimate of depreciation.

Appropriate accounting for the replacement of a component of a fixed asset is to write off


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the written down value of the components and to capitalize costs of the new component.

This requires the determination of the value of the component to be replaced. This

information is available only if the old component had a separate identity and was

recognized separately from the principal asset. Thus, component accounting improves

accounting for the replacement of components. Total cost of acquisition is allocated to

components and the principal asset on an equitable basis.

LAND AND BUILDING, AND COST OF LAND

DEVELOPMENT

Land and building are recognized separately in financial statements. Therefore,

composite cost of land and building is allocated to land and building on some equitablebasis.

The accounting for land development expenditure depends on the status of land

ownership. The cost of land development that provides enduring benefit to the business

is capitalized. In case of owned or leasehold land the development expenditure instead of

being shown separately, should be added to the cost of the land. The net cost of

leasehold land should be amortized if the lease agreement provides for recovery of

development expenditure from the lesser on termination of the lease. The net cost is the

cost of land development minus the recoverable amount, if any.

Land development expenditure, which does not provide enduring benefit, should be

written off in the year in which it is incurred. In case the amount is too large, the entity

may treat such expenditure as deferred revenue expenditure and write it off over a period

of three years or so.

INITIAL RECOGNITION

AS-10 does not specify the conditions that should be met for the recognition of an item oftangible fixed assets. However, as a general accounting principle, an asset should be

recognized only if:

It is probable that the future economic benefits associated with the asset will flow

to the entity


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The enterprise has control over the asset

The cost of the assets or its fair value can be measured reliably

(AS-26)Intangible Asset, stipulates the conditions for recognition of an intangible asset.

The same principle should be applied in recognizing tangible fixed assets. (AS-10)

requires that a fixed asset should initially be recognized at historical cost.

The cost of a fixed asset comprises

Its purchase price, including stamp duty

Import duties and other non-refundable taxes or levies

Any cost attributable to bringing the asset to working condition

AS-10 does not specifically stipulate whether the cost of bringing the fixed asset to the

location of its intended use should be included in its cost. However, it is implicit that the

same should form a part of the cost of the fixed asset. For example, voyage expenses

incurred in the maiden voyage of a dredger acquired in a foreign country for use in India

should be included in its cost. (EAC opinion in CA. November, 2002).

Examples of costs that are directly attributable to the acquisition of fixed asset are:

Costs of site preparation

Initial delivery and handling costs

Installation cost, such as special foundations for plant

Professional fees

Costs of knowhow related to plans, designs and drawings of buildings or plant and

machinery

Borrowing costs, subject to certain conditions stipulated in AS-16.

THE COST OF SELF-CONSTRUCTED FIXED ASSET


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The cost of a self-constructed fixed asset comprises:

Costs that relate to the construction of the specific fixed asset directly

Costs that are attributable to the construction activity in general and that may be

allocated to the specific fixed asset

The cost does not include administration and general overhead cost and abnormal

waste/loss. For example, excessive indirect cost (like idle capacity cost) should be

charged to the profit and loss account instead of being included in the cost of

construction. Internal profits are eliminated in arriving at the cost of construction.

EXPENDITURE DURING CONSTRUCTION PERIOD

Expenditure incurred during the construction period of a new project is usually incurred

to construct new facilities. A large part of the expenditure is directly attributable to fixed

assets constructed during that period.

Therefore, expenditure incurred during construction period (except those which cannot be

attributed to construction activities) is allocated to fixed assets constructed during that

period.

Expenditures that are capitalized include:

General administration and office expenditure

Expenditure on running of vehicles

Expenditure in connection with temporary structure and service facilities

Depreciation of fixed assets used

The general principles are:

Preliminary stage costs should be expensed

Pre-acquisition costs should be capitalized only if they are attributable to a specific

fixed asset.

EXCHANGE OF FIXED ASSET


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(AS-10) stipulates that when a fixed asset is acquired in exchange of another fixed asset,

its cost is usually determined by reference to the fair market value of the consideration

given (asset given), adjusted for cash or cash equivalent transferred. It may be

appropriate to consider the fair market value of the fixed asset acquired if this is more

evident. As-10 as an alternative permits recording the fixed asset acquired at the net

book value of the fixed asset given up.

Although it is stipulated in the AS-10, as a matter of practice an enterprise uses the

alternative accounting method only in a rare situation when the enterprise is unable to

reliably estimate the fair value of either of the fixed assets exchanged.

An entity may acquire a fixed asset in exchange for shares or other securities. In that

case, the entity records the asset at the fair market value of the securities issued or the fair

market value of the fixed asset acquired, whichever is more evident.

AS-10 stipulates the same accounting principles for transactions involving the exchange

of dissimilar and similar assets.

DEMOLITION COSTS

Demolition costs should be charged to the profit and loss account for the period in which

they are incurred. However, they should be capitalized only if they were contemplated as

a part of the acquisition. For example, if a piece of land with a dilapidated building is

acquired, the cost of demolishing the building should be capitalized because at the time

of purchase the demolition was contemplated. Similarly, the cost of treating acquired

property with a known asbestos problem should be capitalized. These costs should be

capitalized as a part of the land or the new building depending on the nature of the cost.

ASSET RETIREMENT OBLIGATION

An entity acquires constructs or operates assets it often incurs obligations other than

those unavoidably related to the acquisition of the asset. An example of such an

obligation is Asset Retirement Obligations (ARO). An example of ARO is the

obligation to dismantle and remove the asset and restore the site. AS-10 does not


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specifically deal with ARO. AS-29, Provisions, Contingent Liabilities and contingent

assets, refers to the accounting for ARO. However, the accounting principles for ARO

are given by IAS-16, and US GAAP.

AS-29, Provisions, Contingent Liabilities and Contingent Assets, given the following

conditions for the recognition of a provision:

The entity has a present obligation as a result of a past event

It is probable that economic benefits will outflow from the entity to settle the

obligation

The amount of the obligation can be estimated reliably

AS-29 further provides that the amount recognized as provision should be the best

estimate of the management. The best estimate should take into account the risk and

uncertainties surrounding the obligation.

Therefore, ARO should be recognized only if these conditions are met. AS-29

does not recognize constructive obligation. Therefore, ARO should be recognized only if

it arises from a contract or by the operation of law. The cost of the asset should include

the amount of the provision for ARO.

AS6: DEPRECIATION ACCOUNTING

Meaning of Depreciation:Depreciation is a measure of the wearing out,

consumption or other loss of value of a depreciable asset arising from use, passage of

time or obsolescence through technology and market changes.

Depreciation is nothing but distribution of the total cost of a depreciable asset over its

useful life.

Depreciable assets

Depreciable assets are those which

1. Are expected to be used during more than one accounting period;


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2. Have a limited useful life;

3. Are held by an enterprise for use in the production or supply of goods and services

Depreciable amount

Depreciable amount of a depreciable asset is its historical cost, or other amount

substituted for historical cost less the estimated residual value.

Applicability of the Accounting standard: This accounting standard is not

applied on the following items.

Forests and plantations

Wasting assets

Research and development expenditure

Goodwill

Live stock

There are two method of depreciation:

1. Straight Line Method (SLM)

2. Written Down Value Method (WDVM)

Note:

A combination of more than one method may be used.

Selection of appropriate method of depreciation depends upon the factors such as

type

of asset, nature of use of such asset and circumstances prevailing in the business

Selected method of depreciation should be applied from period to period,consistently.

Calculation of depreciation: The amount of depreciation is calculated as under

using


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Historical cost or revalued amount

Estimated useful life of depreciable asset

Estimated scrap value of depreciable asset

Therefore depreciation under straight line method is calculated as follows:

Depreciation =Cost Scrap valueat the end of useful life

Estimated useful life in No. of years

Procedure to be followed in case of change in the method of depreciation:

Step 1: Compute depreciation by applying the new method from the date of its

acquisition/installation up to the date of change in the method.

Step 2: Compute the difference between depreciation calculated under step 1 and

accumulated depreciation under old method.

Step 3: The resultant figure may be surplus or deficit. Surplus is credited to P&L A/c

under the head Depreciation written back. Deficit is debited (charged) to P&L A/c.

Step 4: Such change in the method of depreciation should be treated as change in the

accounting policy and its effect must be quantified and disclosed.

AS12: ACCOUNTING FOR GOVERNMENT GRANTS

Government Grants

Government grants are assistance by the Government in the form of cash or kind to an

enterprise in return for past or future compliance with certain conditions.

They are also called as subsidies, cash incentives etc.,

Government grants do not include Government assistance other than in the form

ofGovernment grants AND Government participation


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Government assistance which cannot be valued reasonably is excluded from

Government grants.

Recognition of Government grants

Government Grants should be recognized where there is a reasonable assurance that

The enterprise sill comply with the conditions attached to them, and

The grants will be received.

Kinds of Government grants

There are two types of Government grantsnamely,

a. Non-monetary grants: Grants received in kind like assets such as Land, Plant &

Machinery etc.,

b. Monetary grants: Grants in the form of Cash with respect to a depreciable or non

asset.

Government grants may be received in following ways.

A. Grants related to acquisition of fixed assets

B. Grants related to revenue

C. Grants related to promoters contribution

D. Grants related to compensation for expenses.

Disclosures:

1.The accounting policy adopted for accounting for Government Grants, including

the method of presentation in the financial statements.

2.The nature and extent of Government Grants recognized in the financial

statements, including grant of non-monetary assets given at the concessional rates

or free of cost.

3.

A. Accounting treatment W.R.T grant related to acquisition of fixed asset:


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1. For receipt of Non-monetary grants:

a. If the grant is given at concessional rate, then such asset is recorded at cost of

b.acquisition applicable for the organization.

c. If the grant is given free of cost, then such asset is recorded at nominal value.

2. For receipt of monetary grants:

a. Related to depreciable fixed assetthere are two types of accounting treatment

1.If the grant received is treated as capital receipt - the asset is recorded at Gross

Value less Grant received, if the Grant received is less than the cost of the fixed

asset. The asset is recorded at nominal value.

2.If the Grant received is more than or equal to the cost of the fixed asset.

OR

3.

If the grant received is treated as deferred income. The deferred income is

recognized in the Profit & Loss A/c on a systematic basis over the useful life of

the asset. The balance of the un-appropriated deferred income is shown under

Reserves & Surplus on the liabilities side of the balance sheet as Deferred

Government Grant.

Grants related to non-depreciable fixed asset

The asset is recorded at Gross Value less Grant received, if the Grant received is less

than the cost of the fixed asset.

The asset is recorded at nominal value, if the Grant received is more than or equal to the

cost of the fixed asset.

B. Accounting treatment W.R.T grants related to revenue

Government grants related to revenue should be recognized on a systematic basis in the

profit and loss account over the periods necessary to match with the related costs,

which they are intended to compensate.Such grants should either be shown as Other

Income or be deducted from the related expenses.


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C. Accounting treatment W.R.T grants in Nature of Promoters Contribution

Grants should be credited to capital reserve and it should form part of the shareholders

fund.

D. Accounting treatment W.R.T grants related to compensation for

expenses

Government grants receivable as compensation for expenses or losses (with no further

costs) should be recognized as an income in the year of receivable as an Extra-ordinary

item.

Refund of Government Grants:

Government grants become refundable because certain conditions are not fulfilled. The

grant

refundable is treated as an extraordinary item. Refund of grants may relate to

I. Revenue

II. Specific asset

III. Grants in the nature of Promoters Contribution

Example:Governments grant treatment.

BALACHANDRAN ELECTRONICSLTD.

TREATMENT OF GOVERNMENT GRANT AND ITSIMOACTONVALUTATION OF

FIXED ASSET.

BALACHANDRAN ELECTRONICSLTD ACQUIRES A .Machine whose total

costcomestoRs.315lacs.the co., received a grant of Rs.35lakhs from the central govt. against the

machine. Determine its book value the two alternatives.Useful life of the machine is

5yrs.depreciation will be apportioned in equal trenches @20% over 5 years. Determine

depreciation under the 2alternatives and show the grant will be treated in thefinancial statements.


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SOLUTION

First alternative: Amount (Rs.)

Cost of the machine 3,15,00,000

Less: Government Grant 35,00,000

Book value 2,80,00,000

Depreciation in this case will be applied to 2, 80, 00,000 that is Rs.56, 00,000 every year.

Second alternative:

Book value of the machine under the second alternative: Rs.3, 15, 00,000.Depreciation

in this case will Rs.63, 00,000 every year.

Grant of Rs.35, 00,000 will be treated as deferred income and allowed to income

over the periods, and, in the proportions in which depreciation on machine is

charged. Since the machine has a useful life of 5yrs and thus depreciation @20%

p.a. as above, the following will be treated of grant.

Year 1 Year 2 Year 3 Year 4 Year 5

Rs. Rs. Rs. Rs. Rs.

BALANCE

SHEET

Source of

funds:

Reserves

and surplus


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(Source: Financial management accounting, Ambharish Gupta)

Deferred

Govt.grants

35,00,0

00

28,00,0

00

21,00,0

00

14,00,0

00

7,00,00

0

Less:

Transferred

to profit and

loss

Account @

20% of the

grant

received

7,00,00

0

7,00,00

0

7,00,00

0

7,00,00

0

7,00,00

0

Added to

source of

funds

28,00,0

00

21,00,0

00

14,00,0

00

7,00,00

0

Nil

Secured

loans

PROFITAN

D LOSS

ACCOUNT

Expenses

depreciation 63,00,0

00

63,00,0

00

63,00,0

00

63,00,0

00

63,00,0

00

Income:

Governmen

t Grants

7,00,00

0

7,00,00

0

7,00,00

0

7,00,00

0

7,00,00

0

Net expense

charge to

profit and

loss

account.

56,00,0

00

56,00,0

00

56,00,0

00

56,00,0

00

56,00,0

00


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AS-16: BORROWING COSTS

MeaningBorrowing Cost

Interest and other costs incurred by an enterprise in connection with borrowing of funds

are termed as borrowing costs.

Borrowing cost may include:

i. Interest and commitment charges on borrowings (long-term or short-term)

ii. Amortization of discounts or premiums relating to borrowings

iii. Amortization of ancillary costs incurred in connection with the arrangement of

borrowings

iv. Financial charges in respect of assets acquired under finance lease or under other

similar arrangements

v. Exchange difference arising from borrowings to the extent it amounts to interest costs.

Qual i fying asset

An asset which takes substantial period of time to get ready for its intended use or sale, is

called qualifying asset.

Example: Any tangible fixed assets, which are in construction process or acquired

tangible fixed assets, which are not ready for use or resale. (Plant and machinery,

Building etc.,) Any intangible assets, which are in development phase or acquired but nit

ready for use or resale. (Patents, copyright etc.,)

Investment property

Inventories that require a substantial period to bring them to a saleable condition.(may be

more than one year)

A. Recognition:


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The borrowing costs which directly relatesto the acquisition, construction or

Production of qualifying assets should be capitalized.

The following conditions should be satisfied for capitalization of borrowing costs

as a

Part of the cost of the qualifying asset

The borrowing costs should directly relateto the acquisition, construction or

Production of qualifying assets and the cost can be measured reliably.

The qualifying asset should result in future economic benefits to the enterprises.

Any other borrowing costs should be recognized as an expense in the period in

which

they are incurred.

B.

Borrowing cost eligible for capitalization

Specif ic Borr owings

Funds borrowed specifically for the purpose of obtaining a qualifying

asset is called specific borrowings.

Amount of borrowing cost eligible for capitalization = Actual borrowing cost less

any income on temporary investment of those borrowings.

General Borr owings

Funds borrowed generally (not specifically for the purpose of obtaining a qualifying

asset) is called general borrowings.

Amount of borrowing cost eligible for capitalization should be determined by

applying a capitalization rate to the expenditure on that asset.

Amount of borrowing cost eligible for capitalization = Expenditure on the asset

Capitalization rate.

The capitalization rate should be weighted average of the borrowing costs applicable

to the general borrowings of the enterprises outstanding during the period. Capitalization Rate = Weighted average borrowing cost

Weighted average borrowing cost =Total borrowing cost x100

Total average outstanding borrowings


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The amount of borrowing cost capitalized during a period should not exceed the

amount of borrowing cost incurred during that period.

C. Commencement of capitalization of borrowing cost (When to start capitalization of

borrowing cost) The following conditions must be satisfied for commencement of

capitalization of borrowing cost

a. Expenditure for acquisition, construction or production of a qualifying

asset is being incurred;

b. Borrowing cost is incurred;

c. Activities which are necessary to prepare the asset for its intended use or

sale are in progress.

Expenditure on a qualifying asset includes payment of cash, transfer or other asset

or assumption of interest bearing liabilities.

Any progressive payments received or grants received towards the cost incurred

should be deducted from the expenditure.

D. Suspension of capitalization of borrowing cost (Stop capitalization for a short

period)

Capitalization of borrowing cost should be suspended period in which active

development is interrupted.

Capitalization of borrowing cost is not suspended when a temporary delay is a

necessary part of the process of getting an asset ready for its intended use or sale.

E. Cessation of capitalization of borrowing cost (Stop capitalization)

Capitalization of borrowing cost should cease when substantially all the activities

necessary to prepare the qualifying asset for its intended use or sale are

completed.


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When the construction of a qualifying asset is completed in parts and a completed

part is capable of being used while construction continues of other parts,

capitalization of borrowing costs in relation to a part should cease when

substantially all the activities necessary to prepare that part for its intended use or

sale are completed.

Disclosure:

a. The Accounting Policies adopted for borrowing costs.

b. The amount of borrowing costs capitalized during the period.

Chapter -2

RESEARCH DESIGN

TITLE OF THE STUDY: A Study on Fixed Assets Managementat Versabyte

Data Systems Pvt.Ltd.

PROBLEM OF THE STUDY:-

Every organization faces the problem of fixed assets management start from purchasing


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to disposal of an asset. That is finance problem (borrowing cost), maintenance problem

(repairs & maintenance), depreciation problem, Man power to maintain it (technical

staff), other things regarding fixed asset.

Fixed asset management is a process of management accounting. This process tracks for

such purposes as theft protection, financial accounting, and preventive measures. It is

quite a big problem for many companies and organizations to detect condition, location,

status and other parameters of their fixed assets. A popular method of fixed asset

management supposes the usage of asset tag with serial number. Such tags can also

contain bar code for comfortable reading and understanding.

The project studied regarding all the above problems.

OBJECTIVES OF THE STUDY:-

To study and have an overview of in Versabyte Data Systems Pvt.ltd(VDS)

managing fixed assets.

To study various risk involved VDS Company.

To study working, mechanism and benefits of fixed assets management.

To study whether the method and the sales of the depreciation for the fixed assets

is appropriate as per the companies act 1956.

To study the scope and coverage of (AS-10) on valuation of fixed assets.

To know application of (AS-11) government grant.

To study the borrowing cost problem facing by the company (AS-16)

SCOPE OF THE STUDY

The study mainly concentrates on the fixed assets management, fixed assets utilization

and risk-return dynamics of assets by the VDS Company. Borrowing cost problem, and

also on the measuring the efficiency of fixes assets of and the impact of extent of

utilization of fixed assets on sales and operating profits of VDS.This will help us to know

fixed assets utilization and their credit to profits which helps to the growth of the

company. And also which fixed assets are not in active use or idle or which are stated at


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the lower of their net book value.

Review of Fixed Asset Management Systems

Article(Byisaac m. O'bannon, technology editor on nov 29, 2010)

Here in this article he has studied that ,For those with many fixed assets, the ability to

perform mass actions is essential, as are asset location and tracking capabilities,

particularly for organizations with multiple locations.

Strategic and effective asset management is somewhat of a combination of knowledge of

tax law and the art of structuring variable depreciation methods into beneficial and legal

treatments that help a business take the greatest advantage of offsets to their tax

liabilities, and to plan for future investment. As a tax and accounting professional, youare the artist. And a fixed asset management program and knowledge of tax law are some

of the tools of your trade.

Books

D.S.Rawat, accounting standards explained about accounting standards.

S.P.Jain ,K.I.Narang,advanced accounting explained about accounting related to

fixed assets

R.K.agarwal,GAAP explained about the Indian GAAP

R.K.Agarwal,Accounting standards explained about the accounting standards

relating to Indian accounting standards( IICA)

Ambharish Gupta, Financial accounting for management explained about the

overall assets valuation methods

Simplified material of accounting standards by Rachan kumar explained in short

the all accounting standards

Journals

Oorja international journal of management of IT, (A study on effic iency and financing

fixed assets) by Dr.M.Sekar,M.Gowr,A.G.Ramya .used trend analysis to measure the

efficiency of fixed assets performance in the organization.
http://www.cpapracticeadvisor.com/contact/10267429/isaac-m-obannonhttp://www.cpapracticeadvisor.com/contact/10267429/isaac-m-obannonhttp://www.cpapracticeadvisor.com/contact/10267429/isaac-m-obannon


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Operational definition of concepts

Primary and secondary sources.

Primary datarefers to the data that one has collected using his or her own efforts.

Primary data,by contrast, are collected by the investigator conducting the research.

Secondary dataon the other hand refers to data that has been collected by another

party. Secondary data can usually be accessed through published or electronic form. .

Common sources of secondary data forsocial science include censuses, organizational

records and data collected through qualitative methodologies orqualitative research.

SOURCES OF DATA:-

The data required for the study would be collected from both primary and

secondary sources. The primary data pertains to data collection from interviews and observations.

The secondary data relates to data collection from the websites, articles, journals,

reference books, and annual reports of the company, etc.

Data was also collected through personal visits to persons. The data has been

analyzed statistical tools.

Data has been presented with the help of bar graph and line graph.

SAMPLE DESIGN: Only the fixed assets of VDS Company.

METHODOLOGY:-

To address the objectives underlying the study, the primary data would be

collected through questionnaires and interviews. The observations are analyzed using

various statistical tools and trends.

TYPES OF RESEARCH PLUS TOOLS FOR DATA COLLECTION.

1.www.google.com.

2.Journals

3.Company information as hard and soft copy.
http://en.wikipedia.org/wiki/Primary_datahttp://en.wikipedia.org/wiki/Social_sciencehttp://en.wikipedia.org/wiki/Censushttp://en.wikipedia.org/wiki/Qualitative_researchhttp://www.google.com/http://www.google.com/http://en.wikipedia.org/wiki/Qualitative_researchhttp://en.wikipedia.org/wiki/Censushttp://en.wikipedia.org/wiki/Social_sciencehttp://en.wikipedia.org/wiki/Primary_data


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4.Ratio analysis

5.Reference books

PLAN OF ANALYSIS

Classification and tabulation is made for the information which is collected through

company .Results is highlighted by preparing the tables for information collected through

primary data. Percentage will be calculated and different graphs are prepared.

LIMITATIONS OF STUDY:-

The study curtails comparison as it is within the preview of only one organization.

The study can only be used as a preview to entire range of problems.

The information provided by the organization was limited to a far extent due the

company rules and secrecy purpose.

The reference period is taken as 5 years.

Time factor as a period of one month for gathering data

CHAPTER SCHEME

CHAPTER 1: INTRODUCTION:

This chapter views the theory part of Fixed Assets Management and its importance,

usefulness, status and why the study is needed.

CHAPTER 2: RESEARCH DESIGN

This chapter views the methodology of the study, the research design, and sources ofdata, sampling plan, field work, data processing and plan of analysis.

CHAPTER 3: INDUSTRY & COMPANY PROFILE

This chapter views the origin & growth of VSD, its objectives, Mission, Developmental


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activities & profile of company in general, etc.

CHAPTER 4: DATA ANALYSIS & INTERPRETATION

In this chapter data collected is complied, tabulated, processed &analyzed and interpreted

with the help of graph to present data analysis.

CHAPTER 5: FINDINGS, SUGGESTIONSAND CONCLUSION

This Chapter deals in providing summary of findings through Data analysis and

interpretations from the previous chapters, and gives suitable suggestions based on the

study made from this project, and This chapter contains the summary providing an

overall study of the project.

Chapter -3 company profile

ABOUT INDUSTRY

Power supply units

A power supply unit(PSU) convertsmains AC to low-voltage regulatedDC power for

the internal components of a computer. Modern personal computers universally use a

switched-mode power supply. Some power supplies have a manual selector for input

voltage, while others automatically adapt to the supply voltage.

EVOLUTION

Address by Frank Toich, Sales Manager, at Kepco's 50th Anniversary Celebration1926

Ad for Motorola Battery Eliminator. The power supply industry dates back to the early
http://en.wikipedia.org/wiki/Mains_electricityhttp://en.wikipedia.org/wiki/DC_powerhttp://en.wikipedia.org/wiki/Switched-mode_power_supplyhttp://en.wikipedia.org/wiki/Switched-mode_power_supplyhttp://en.wikipedia.org/wiki/DC_powerhttp://en.wikipedia.org/wiki/Mains_electricity


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1920s, when crude devices were first developed to serve as "B" battery eliminators to

power radios in both the commercial and consumer markets.

The market for separate power supplies evaporated around 1929, when most radios

manufactured included a built-in power supply. The need for stand-alone power supplies

remained relatively small in the 1930s and into the 1940s. The dominant technology

during this period consisted of vacuum tube linear regulators.

Power supplies used vacuum tubes for both the power and control elements. Typically, a

voltage regulator (VR) tube, the predecessor to today's zener diodes, was used to produce

a stable reference. Control was prettymuch limited to the manual twisting of knobs. In

those days we did not care too much about dissipation. Under normal circumstances,

vacuum tubes ran pretty hot -- and unless the plate of the tubes glowed red, or glass

started to melt, no one worried much about it.In the mid 1940s, three companies set up

shop in a relatively obscure community in Queens, New York A milestone in the industry

occurred in the 1950s when semiconductors were first introduced into the power supply

design In the 1970s, an energy crisis, which affected the entire industrial world, provided

the switching power supply with an opportunity to re-surface and establish a significant

position in the electronic marketplace. The big breakthrough in the 1970s was the

development of low loss ferrite (transformer core material), coupled with the readilyavailable, higher speed silicon transistors that made possible the practical reality of high

frequency products which could operate above 20KHz where they were inaudible. The

1980s saw many new start-up companies enter the market producing switch-mode

products. Many of these new companies were based in the Pacific Rim, first in Japan, and

eventually shifting to Taiwan and Hong Kong.

Inception

The idea of establishing versa byte data systems pvt.ltd is started by 4 members who are

active players and share holders and the directors too.


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Previously many products were like IT products, telecommunication products (message

Account terminals, telegraphic terminals) were importing from Russia. so the idea

clicked to manufacture the same products in our own country and can supply to other

countries including India too.

Like this versa byte data systems running now after crossing many pitfalls, at good

position.

Company history

Versa byte data systems private limited (VDS) started operations in the year 1987

addressing the requirements of defence, telecommunition and other general industries in

the area of power supplies and microprocessor based products. Over the years, it has

provided customized solutions to various satisfied customers and continues to do so even

today.

Over the years we have pioneered in successfully meeting the challenges of producing Hi

reliability custom built products for defense services.

VDS specializes in design and development of MIL standards power supplies for Indian

defence Establishments. The products have been fully designed in house to suit the

customers requirement. These products have found good standing amongst the users

because they are import substitutes and low priced. All these products are MIL standard

satisfying stringent quality requirements like dimensions, size and special features. These

are approved by defence authorities like CRI, CRE, ALISDA, ASIEO, DLRA, and

RCMA. Density power supplies for submarine applications are approved by NSTL and

WE. Our products are qualification approved by defense quality approving authorizes.

We extend life time support to our products delivered.

VDS has the capacity to provide any technical skill in power electronics field by

selecting appropriate technology and suitable personnel because of years of cumulated

experience directors of the company.

Best of the public sector undertakings and other units who meet the defence requirement


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government of India are the satisfied customers of the company.

The strength of the company is a experienced design team supported by qualified

engineers and dedicated administrative staff. We stand unique in the power projects

because of our technical capability and selection of products.

Objectives of the company

To carry on the business as:

manufacturers,assemblers,buyers,sellers,indentors,hirers,repairers,importers,system

engineers,systemanalystsandconsultantsofalltypesofcomputersandmicroprocessorsbaseds

ystems,mainframesystems,personelcomputers,wordprocessors,computerised power

systems and

othercomputerizedandmicroprocessorbasedsystemsandothercomputerizedandmicroproces

sorbasedsystemsforcommunication,medical,business,commercial,industrial,environmenta

l,processcontrol,instrumentsandperipherals,acecssories,apparatus and all things used there

with or in the manufacture,maintenance,repair and working thereof

To carry on the business as:

manufacturers,buyers,sellers,indentors,hirers,repairers,importers,exporters,promoters,age

nts.representatives and consultants of all kinds of peripherals and associated equipments

such as printers,disk,drivers,video display units, line printers, magnetic tape drivers, hard

disk controllers and inter faces instruments. Logic analyzers and control equipmentsincluding data acquition systems,analog,A to D and D to A converters.line

receivers,paging and data acquisition systems.

To function as consultants and advisers to individuals, firms, bodies, corporation,

local authorities and government departments in

business,industry,management,engineering technological and research fields.

Vision

Serve nation by quality products to navy, army, and airforce.

Mission

Youcan get in touch with us with an idea and we will make it a reality


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Nature:The Company is engaged in the manufacturing and research and development

of power supply units at present Versa byte data systems

Board of directors

Mr.P.S.Reddy

Mr.Narahari.C.N

Mr.Rajesh.P.Reddy

Achievements in the year 2008-09

One of the companiess reputed customer to whom power supply units were supplied in

earlier years had placed orders for design, development and supply of 1 to 3 phase of

power converters. These are successfully designed, manufactured and supplied to

customers to their entire satisfaction.

We had orders worth orders Rs.1457.80lakhs as on 1st April 2008 and received about

Rs.717.19 lakhs worth orders during the year. After executing the orders worth

Rs.1173.62 (Basic cost), we had about Rs.1001.37 confirmed orders in hand as on the

closure of the year 2008-09.


Company had received developmental order from a reputed sector unit for the

development and supply of EPC (electronic power controller) for MPM (microwave

power module)and succeeded in delivering SIX(6) such units during first phase for

approval.


Rs.849.34 lakhs worth orders during the year. After executing the orders worth Rs.684.85

(Basic cost), we had about Rs.749.33lakhs confirmed orders in hand as on the closure ofthe year 2010-11.


Company had received an order for the development and supply of electronic power

control distribution unit for 270V DC a project from a defense unit of government of


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India, Bangalore and have delivered 4 units during the year.


Rs.231.69 lakhs worth orders during the year. After executing the orders worth Rs.660.82

(Basic cost), we had about Rs.2996.20lakhs confirmed orders in hand as on the closure of

the year 2011-2012.


Company had received an order for one of project for the development and supply of

MULTI OUTPUT DC DC POWER SUPPLY WITH CBIT FACILITY QTY-12 NOS

value Rs.171.42lakhs from a defense unit of government of India, Bangalore and the

work is in progress.


Rs.917.96lakhs worth orders during the year. After executing the orders worth Rs.943.76

(Basic cost), we had about Rs.2474.10lakhs are in hand as on the close of the year 2012-

2013.

Future plan 2012-13

For the year 2012-13 work is in progress for the designing and development of a product

being name high Endurance As

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