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CMA Intermediate · Financial Accounting · Property, Plant and Equipment (AS 10)

Ganga Textiles Ltd acquired a machine under a lease that, as per AS 19 Leases, is evaluated on the basis of transfer of risks and rewards. Which statement is consistent with the scope of AS 10 on such leased PPE?

Recognition of leased PPE follows AS 19, which uses the transfer of risks and rewards, but the other aspects of accounting for these assets, including depreciation, are still governed by AS 10. AS 10 therefore continues to apply beyond recognition.

  1. AAS 10 governs both recognition and depreciation, overriding AS 19
  2. BAS 19 decides whether the item is recognised, but other aspects such as depreciation are still prescribed by AS 10Correct
  3. CAS 10 does not apply at all, since AS 19 deals fully with leased assets
  4. DAS 10 applies only to recognition, while depreciation is left to AS 19

Explanation

AS 10 notes that another standard such as AS 19 may require a different recognition approach (risks and rewards). In such cases, other aspects of accounting, including depreciation, are still prescribed by AS 10. Hence the statement that AS 10 does not apply at all is wrong.

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