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I would appreciate if someone could help me with few questions.
1) Fixed Asset Accounting
Company bought an asset for $1mln from abroad, according to the local law buyer should pay an import tax – 10%. According to ISA 16 I could capitalize such sort of costs, however, I don’t exactly sure how to treat them in BS, IS and CF.
Balance Sheet
Dr PPE Cr Tax Payable (to government) $0,1mln
Income Statement
No expenses since we capitalized current costs.Cash Flow
Should I treat this as a difference in a working capital under operating cash flow?Thanks in advance!
Hi,
Don’t follow how the example you’ve given is a discounted cash flow, dcfs pertain to sums payable in the future translated into money terms as of today?
Answering your query as follows:-
B/S
Dr PPE
Cr Creditors
Cr Tax liabilityIS
Dr depreciation expense
Cr provision of depreciation in B/SCF
Increase creditors within working capital in Operating activities.Tax reconciliation with balancing figure shown in Operating activities
Ppe reconciliation with balancing figure shown in Investing activities.
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