01-14-2011, 03:03 PM
I have been reviewing accounts of an independent power producer and came across an issue for which i seek professional advice of qualified accountants and auditors in this forum..
The required commercial production date was 31 March 2009 as per agreement with Pakistan infrastructure board. The Company had given guarantee of startup of commercial production on that date.. However,it started production on the mid of December.. Due to delay, the Company had to pay delay charges of $1.1 million..
The issue is that the payment was made on December 2010 and Company capitalized it on December 2010.. Logic behind such capitalization is that it directly pertained to the acquisition of plant etc..
IAS-16 does not specifically mention anywhere about this scenario.. Hence, I need your advice regarding any such practical event in your experience..
Waiting for replies
Thanks
The required commercial production date was 31 March 2009 as per agreement with Pakistan infrastructure board. The Company had given guarantee of startup of commercial production on that date.. However,it started production on the mid of December.. Due to delay, the Company had to pay delay charges of $1.1 million..
The issue is that the payment was made on December 2010 and Company capitalized it on December 2010.. Logic behind such capitalization is that it directly pertained to the acquisition of plant etc..
IAS-16 does not specifically mention anywhere about this scenario.. Hence, I need your advice regarding any such practical event in your experience..
Waiting for replies
Thanks
