Income Computation and Disclosure Standard (ICDS) V – Tangible Fixed Assets
ICDS-V provides guidance on classification, cost determination, and treatment of tangible fixed assets, including land, buildings, machinery, plant, and furniture, used for business purposes.
- Classification of Tangible Fixed Assets
Assets held for use in the production or supply of goods/services and not for sale in the ordinary course of business.
Stand-by equipment and servicing equipment must be capitalized.
Spare parts are expensed unless used for a specific fixed asset with irregular replacement, in which case they are capitalized.
- Determination of Actual Cost
Purchased Assets: Cost includes purchase price, non-recoverable taxes, freight, installation costs, and trial runs, net of trade discounts.
Self-Constructed Assets: Cost includes direct costs, attributable general expenses, and depreciation of machinery used.
Assets Acquired in Exchange: Cost is the fair market value (FMV) of the acquired asset.
Jointly-Owned Assets: Cost is apportioned based on agreement or payment contribution.
Group Purchases: Cost is allocated based on FMV.
- Treatment of Repairs and Maintenance
Capitalized: If expenses increase economic benefits beyond the asset’s original standard.
Expensed: If they only maintain existing benefits.
- Depreciation & Asset Transfer
Depreciation is computed as per the Income-tax Act, 1961, using either the WDV method or the SLM (for power generation units).
No depreciation is allowed on goodwill.
Asset transfers: If the block ceases to exist, gains/losses are taxed under capital gains. Otherwise, sale proceeds reduce the block value.
- Disclosures inForm 3CD
Description, rate of depreciation, cost, and WDV of assets.
Additions/deductions, including GST credit, forex gains/losses, and subsidies.
Depreciation claimed during the year.