IAS – 23 (Borrowing costs):

·         Objective: It deals with treatment of loan interest if loan has been particularly taken to construct/ purchase an asset that takes time to get ready for use.

        

           ·         Treatment:

Capitalized Amount = (Interest cost – Investment income on temporary investment)

  NCA                                                                                        DR

Cash/Bank/ Loan interest payable                                                        CR

* Start capitalization from the time activities of constructing the asset commences

*  Cease capitalization either due to completion of activities of constructing or due to suspension of construction for disputes

IAS – 16 (Property, plant & equipment):

Definition: Tangible assets held for more than 12 months for use in a business ·         Recognition: *   Probable future economic benefits will flow to the entity *  Cost of the asset can be measured reliably ·         Initial recognition: at cost, which includes – *  All capital costs involved to bring the asset in working conditions *  E.g. site preparation cost, installation & delivery cost, borrowing cost, dismantling cost       Subsequent expenditure: *  Can only be capitalized if total economic benefits increase above those expected on original recognition *  Otherwise, it should be recognized in SOPL (i.e. I/S) as it only maintains the economic benefit originally expected Depreciation: *  Systematic allocation of an asset’s cost over its useful life *  It should be charged from the date the asset is available for use *  Straight line method = (Cost – residual value)/ useful life *  Reducing balance method = (Net book value X certain %) Measurement: *  Cost Model = (Cost – Accumulated Depreciation) – Impairment loss *  Revaluation model: *  Revaluation at start of year: *  NBV at year end = (Revalued amount – Depreciation based on revalued amount over its remaining life) *  Revaluation increase/decrease = Revalued amount – Opening NBV *  Revaluation at end of year: *  NBV at year end = Revalued amount *  Revaluation increase/decrease = Revalued amount – Closing NBV  Journal of revaluation:   Non-current Asset (New value – Cost)                        DR    Accumulated Depreciation (up to date)                       DR   Revaluation reserve (OCI)                                                CR                                                        *  Excess depreciation on revaluation gain transferred to R/E:   Revaluation reserve                                                     DR   Retained earnings                                                             CR                                            *  Revision of useful lives:   Depreciation = NBV at date of change/ Revised life *  Addition of NCA during the year:   Depreciation = (NBV + Addition)/ Remaining life *  Revision of residual value: *  Depreciation =(NBV up to revision - New residual value)/ Remaining life   *  Journal of disposal:       Cash/ bank (sales proceeds) DR   Accumulated Depreciation (up to date) DR   * Loss on disposal (B)   NCA (at cost) DR   CR   * Gain on disposal (B)   CR

Income from House Property u/s 24-25

 

How does the VAT Chain Work?

 

VDS head and rate as per Finance Act. 2021-2022

 

Calculation of net Bill amount in the case of Excluding TDS & VAT

 

Excluding TDS & VAT or net payment,

Suppose, ABCD Co Ltd. has a contract with vendor to pay BDT 100 (net) and if any TDS and VDS is applicable that ABCD will need to bear extra over and above 100. Considering 15% VDS and 10% TDS is applicable in this transaction. How value of VDS and TDS will be calculated?

Answer: If net payment = BDT 100.00 Then it is 90% of the base value or Income as TDS rate is 10% Base value would be = 100*100/90 = BDT 111.11

Therefore, TDS amount of BDT (111.11-100) = BDT 11.11

And VAT amount would be 15% on BDT = BDT 111.11, VAT=111.11*15%=BDT 16.67

As per new VAT Act 2012, Price should be inclusive of VAT amount

Calculation Base Value in the case of Including TDS & VAT

 

WE ASSUME TAX RATE IS 10% AND VAT RATE IS 15%.

Including TDS & VAT

If the invoice value of vendor is Tk. 5000 including VAT @ 15%, submitted for the payment to resident;

Then VAT would be = BDT (5,000 – 5,000 * 100/115)=BDT 652, Tax Deduction at Source (TDS) BDT(5,000 – 652) * 10% = BDT 4,348 @10% = 435

Here base value = BDT 4,348