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AS 13
Accountancy
As per AS 13 when we acquire an investment for exchange of an asset if FMV of asset given up and FMV of asset acquired both are given , which one should we consider as cost of acquisition? Is the answer same for AS 10 PPE also ? If yes why?
Answers (2)
In case of AS 13 where an investment is acquired for consideration other than cash the cost of acquisition should be fair value of asset given up or fair value of asset acquired whichever is more clearly evident. In the case of AS 10, where a PPE is acquired for consideration other than Cash, there is a need to check if the transaction lacks commercial substance . A transaction is said to lack commercial substance if the position of enterprise remains the same before and after the transaction in terms of cash flows . Where a transaction lacks commercial substance the cost of acquisition is WDV of the asset given up. Where transactions do not lack commercial substance, cost of acquisition is fair value of asset given up or fair value of asset acquired which ever is more evident, if both are not clearly evident then cost of acquisition will be WDV of asset given up.
