Are administrative and general overheads capitalized under AS 10?

No. General overheads, administration costs, advertising, and staff training costs cannot be capitalized as PPE because they are not directly attributable to bringing the asset to operating condition.

How are spare parts accounted for under revised AS 10?

Items such as spare parts, stand-by equipment, and servicing equipment are recognized as PPE when they meet the definition of PPE. Otherwise, such items are classified as inventory under AS 2.

Can depreciation method be changed under AS 10?

Yes. A change in depreciation method is treated as a change in accounting estimate under AS 5 and is accounted for prospectively from the date of change, with no retrospective restatement.

AS 10 (Revised) Property, Plant & Equipment: Component Accounting & Decommissioning Costs

AS 10 (Revised) Property, Plant and Equipment aligns Indian GAAP with international standards. In CA Intermediate, examiners test component accounting, accounting for decommissioning and site restoration costs, and revaluation reserve transfers.

Key Concept Flowchart & Decision Tree

1. Recognition Criteria & Cost Elements

An item of PPE must be recognized as an asset if and only if it is probable that future economic benefits associated with the item will flow to the enterprise and the cost of the item can be measured reliably.

Cost includes: (1) Purchase price, import duties, and non-refundable purchase taxes, after deducting trade discounts and rebates; (2) Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and (3) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

2. Component Method of Depreciation

Each part of an item of PPE with a cost that is significant in relation to the total cost of the item must be depreciated separately. For example, in an aircraft, the airframe and engines have different useful lives and must be depreciated separately.

When a significant component is replaced, the carrying amount of the old replaced part is derecognized, and the cost of the new part is capitalized into the asset carrying amount.

3. Revaluation Model & Treatment of Revaluation Surplus

If an item of PPE is revalued, the entire class of PPE to which that asset belongs must be revalued to prevent selective asset cherry-picking. An increase in carrying amount is credited directly to owners' interests under the heading of Revaluation Surplus.

However, the increase is recognized in P&L to the extent that it reverses a revaluation decrease of the same asset previously recognized in P&L. Revaluation surplus may be transferred directly to Revenue Reserves when the asset is derecognized.

Treatment of Revaluation Gains & Losses Under AS 10

Scenario	First Time Revaluation	Subsequent Revaluation (Reverse of Past)
Revaluation Surplus (Upward)	Credit to Revaluation Reserve (in Balance Sheet)	Credit to P&L up to previous loss; excess to Revaluation Reserve
Revaluation Deficit (Downward)	Debit to Profit & Loss Statement	Debit to Revaluation Reserve up to previous surplus; excess to P&L

⚠️ Common Examiner Pitfalls

Avoid vague general explanations. Always cite applicable statutory sections or Accounting Standard numbers, draw proper working notes, and state underlying assumptions clearly.

🎯 Scoring Exemption Checklist

Present answers with clear step numbers, highlight key final figures with boxes, write formal conclusions, and verify cross-references before moving to the next question.