Capital Work In Progress

• Dear Dinesh I agree with you.
• In case I start construction in my own factory for expansion, all the expenses I make on brick and cement are accounted under CWIP and will ultimately be part of the value of building (capital asset). Correct me if I am wrong.

Dear Bindu,
I would like to explain in simple words.
Any capital project, the expenditure of which is debited to capital expenditure, is termed as "capital work in progress" right from day one of its start till it is fully accomlished for operation. The project once becomes fully operational becomes a completed work.
But, some corporate offices try to take advantage of depreciation during different financial years even during the curerency of work before its completion by declaring parts of projects as completed. In fact that is risky, if the Taxation authorities take cognizance of that. That is not correct unless a big project is segmented in to small projects to be completed and made operational in parts for the purpose of earning revenue.

Hi Bindhu
Capital WIP= Input Costs like Raw Materials Billwise+Labour+Overheads and incidentals.
In case you are developing a Fixed Asset Management Software (FAMS) inhouse it is an intangible asset and costs attributable to such software development like coding charges,Programmers and project salary for FAMS and testing charges, validation charges etc shall be specifically and systematically recorded and determined using a job and time cost sheet and all the direct attributable costs to such software shall be capitalized as asset.(Refer AS-10 Fixed Asset and AS-26 Intangible Asset for resolving your doubts)

Hi All,
I think implementation of Softwares also treated as capital work in progress. Experts... please advice me... how we can handle this?

no it is not capital work in progress if you happen to develop it for your own consumption internally

Dear Bindu,
Any project, which causes a revenue earning capacity of an organisation should be capitalised. Bigger and time taking software should always be capitalised to take advantage of depreciation. Otherwise the project tends to eat not only the profits but also the capital of the firm. Not only that, any expenditure in future on its updation and enhancement also reduces the profitability of the firm.
Any such software can be treated as work in progress during its development and parallel test run stage, if any. Once it is ready for implementation after test runs, it becomes a completed work.