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Should purchase of Hard Disk and DVD be capitalised?
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Answer Posted / amar sharma
In AS:10 Terms, if the hard disk is part of the computer that is being purchased, then it will form part of the computer that is being capitalized. Whereas, if the hard disk is only a replacement for the previous one that is being discarded for one or the other reason, strictly in terms of AS:10, the previous hard disk needs to be written off and the new one capitalized, if and only if the entity has sufficient reasons to believe that it will enhance the life and working capacity of the computer. (That is, like the purchase of a 1 TB hard disk in replacement for a 160 GB one.)In any other case, it will be treated as a replacement, and needs to be accounted in repairs and maintenance only. a
DVD, however, if not existing in the current computer needs to be capitalized along with the value of the computer and depreciated over the remaining part of the life pf the computer. the same applies for the hard disk also.
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