TMI BlogACCOUNTING POLICIES AND STANDARDSX X X X Extracts X X X X X X X X Extracts X X X X ..... be recognised on the date of declaration. c. In respect of all interest-bearing investments, income must be accrued on a day to day basis as it is earned. Therefore, when such investments are purchased, interest paid for the period from the last interest due date upto the date of purchase must not be treated as a cost of purchase but must be debited to Interest Recoverable Account. Similarly interest received at the time of sale for the period from the last interest due date upto the date of sale must not be treated as an addition to sale value but must be credited to Interest Recoverable Account. d. In determining the holding cost of investments and the gains or loss on sale of investments, the 14 [ weighted ] average cost method must be followed. e. Transactions for purchase or sale of investments should be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisitions through private placement or purchases or sales through private tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission should be recognised as revenue only when there is no devolvement on the scheme. Where there is devolvement on the scheme, the full underwriting commission received and not merely the portion applicable to the devolvement should be reduced from the cost of the investment. 8 [m. In case of real estate mutual fund scheme, investments in unlisted equity shares shall be valued as per the norms specified in this regard. 9 [Part B: For direct investment in real estate asset Definitions 1. In this Part, unless the context otherwise requires-: (a) fair value means the amount for which an asset could be exchanged between knowledgeable parties in an arm s length transaction and certified by the real estate valuer; (b) knowledgeable means that both the buyer and the seller are reasonably informed about the nature and characteristics of the real estate asset, its actual and potential uses, and market conditions at the balance sheet date; 2. A real estate asset that is held by a real estate mutual fund scheme shall be valued at fair value. 3. Where a portion of the real estate asset is held to earn rentals or for capital appreciation and if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state assets in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The cost of such a real estate asset shall be measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. The acquired real estate asset shall be measured in this manner even if an real estate mutual fund scheme cannot immediately derecognize the asset given up. If the acquired real estate asset cannot be measured at fair value, its cost shall be measured at the carrying amount of the asset given up. 11. A real estate mutual fund scheme determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are expected to change as a result of the transaction Explanation: An exchange transaction has commercial substance if: (a) the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred, or (b) the real estate mutual fund scheme-specific value of the portion of the real estate mutual f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the asset. iv. The best evidence of fair value is given by current prices in an active market for similar real estate asset in the same location and condition and subject to similar lease and other contracts. Care shall be taken to identify any differences in the nature, location or condition of the asset, or in the contractual terms of the leases and other contracts relating to the asset. v. In the absence of current prices in an active market, information from a variety of sources shall be considered, including: (a) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences; (b) recent prices of similar properties on less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and (c) discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding contingent rent that is expected to become payable). Accordingly, if a valuation obtained for aN asset is net of all payments expected to be made, it will be necessary to add back any recognised lease liability, to arrive at the fair value of the real estate asset for accounting purposes. ix. The fair value of real estate asset does not reflect future capital expenditure that will improve or enhance the asset and does not reflect the related future benefits from this future expenditure. x. Where a real estate mutual fund scheme expects that the present value of its payments relating to a real estate asset (other than payments relating to recognised liabilities) will exceed the present value of the related cash receipts it shall apply Accounting Standard (AS) 29, Provisions, Contingent Liabilities and Contingent Assets to determine whether to recognise a liability and, if so, how to measure it. 15. To determine the fair value of a real estate asset in accordance with the above-mentioned paragraphs, a real estate mutual fund scheme is required to use the services of two independent and approved valuers having recent experience in category of the real estate asset bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the SEBI (Mutual Funds) (Amendment) Regulations, 1998 w.e.f. 12-1-1998. 7 Substituted for credited by the SEBI (Mutual Funds) (Amendment) Regulations, 1998 w.e.f. 12-1-1998. 8 Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 2008, w.e.f. 16-4-2008. 9 Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 2008, w.e.f. 16-4-2008. 10. Substituted vide Notification No. SEBI/LAD-NRO/GN/2019/37 dated 23-09-2019 w.e.f. 15-10-2019 before it was read as 3 [(g) Where income receivable on investments has accrued but has not been received for the period specified in the guidelines issued by the Board, provision shall be made by debiting to the revenue account the income so accrued in the manner specified by guidelines issued by the Board.] 11. Omitted vide Notification No. SEBI/LAD-NRO/GN/2019/37 dated 23-09-2019 w.e.f. 15-10-2019 before it was read as In respect of privately placed debt instruments any front-end discount offered should be reduced from the cost of the investment. 12. Omitted vide Notification No. SEBI/LAD-NRO/GN/2021/08 dated 04-02-2021 w.e.f. 30th day from the date of their publication in the Official Gazette, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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