Scenario on Assets Based Accounting Standards
Vayu Power Limited (VPL), an Indian manufacturing entity, engaged in several transactions during the financial year 2024-25. On 1st April 2024, VPL acquired a specialized turbine for its manufacturing plant for ₹50,000,000 (excluding recoverable GST of ₹9,000,000). VPL incurred import duties of ₹5,000,000 (non-refundable), site preparation costs of ₹2,000,000, and initial operating losses of ₹1,500,000 before the turbine reached its intended operational performance. The turbine was ready for its intended use on 1st July 2024, with an estimated useful life of 10 years and nil residual value. VPL depreciates plant and equipment using the straight-line method. On 1st October 2024, VPL commenced construction of a qualifying asset (a new processing facility). To finance this, VPL obtained a specific bank loan of ₹20,000,000 at 10% per annum on 1st October 2024. Pending expenditure, ₹8,000,000 out of the unutilized loan proceeds was invested in short-term deposit receipts for 3 months (from 1st October 2024 to 31st December 2024), earning interest income at 6% per annum. Active construction work continued without interruption from 1st October 2024 through 31st March 2025.
