TMI BlogACCOUNTING NORMS, INVESTMENTS AND EXPENSE CEILINGX X X X Extracts X X X X X X X X Extracts X X X X ..... d expenses of trustees; iv. Audit fees; v. Subsequent Rating and Appraisal fees; and vi. Listing fees. (b) The annual recurring expenses shall not exceed 2 percent of the funds raised under the collective investment scheme. (c) Incentive fees No incentive fee based on performance of the scheme shall be charged to the scheme in any form or manner. (3) Other Expenses Other direct costs, if any, which are incidental to the operation of the collective investment scheme may be charged to scheme, as may be approved by trustee: Provided that granular (item wise) list of direct costs covering at least eighty percent expenses shall be disclosed in offer document and a quarterly disclosure of actual expenses shall be made. (4) All other expenses shall be borne by the Collective Investment Management Company: Provided that collective investment scheme related expenses including commission paid to distributors, by whatever name it may be called and in whatever manner it may be paid, shall necessarily be paid from the scheme only within the regulatory limits and not from the books of the Collective Investment Management Company, its associate, promoter(s), tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive investment scheme], the period of lease and conditions for future renewals of lease. 3.3 Land Development Expenses These include expenses on : New access roads and fencing Major changes in land contours Levelling, uprooting and terracing Regular upkeep and maintenance of land Expenses of a capital nature should be added to the cost of land. In case of leasehold land, these expenses should be written off over the period of the lease or the period of 25 [collective investment scheme], whichever is less. Expenses of a revenue nature should be charged to the Profit and Loss Account in the year in which they are incurred. 3.4 Infrastructure and other facilities shall include : Roads and Fencing Security and Research and Development Buildings Drip Irrigation systems, water systems Agriculture Equipments and Production facilities These should be accounted as Fixed Assets in accordance with AS-10 on Accounting for Fixed Assets issued by ICAI. 3.5 IAS 36 requires that impairment losses in respect of assets should be recognised. Impairment arises whenever an asset s carrying amount exceeds its recoverable amount. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NRV would generally mean the amount that would be realised in the normal course, in case the standing crops are disposed of on that day. NRV can be determined on the basis of estimated selling price in the ordinary course of business less estimated cost to be incurred in future for bringing the crop to maturity, and the cost necessarily to be incurred to make the sale. In case the NRV is lower than the total of the crop development expenses at the year end, then a suitable provision for the difference between these two figures should be made and disclosed as follows : Crop Development Expenses (At Cost) X Less : Provision for dimintion in value Y X-Y 5.3 The crop development expenses and the provision for diminution will be carried forward to the next year at gross values. A similar exercise would be done at the end of each year. In case the NRV at the end of the second or subsequent year is greater than/or equal to cost in the respective year, then it will be possible to recoup the provision account by transferring it to the credit of Profit and Loss Account only to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to Profit and Loss account. Income from Investments - income arising out of investments of surplus bank balances, etc. shall be accounted on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend from Investments - dividends, if any, will be recognized when the right to receive payment is established. Sale of Standing Crops at terminal point - sale proceeds/transfer value of the standing crops at the terminal point shall be accounted as and when they are disposed off/transferred. The profit arising on such transactions over the book value shall be accounted at the point of sale/disposal; this should be set off against the crop development expenses. 9. Expenses 9.1 Expenses other than Crop Development Expenses can be broadly classified as under: Initial Marketing and Launch Expenses Normal Business Expenses 9.2 Initial issue expenses Initial issue expenses may be treated as deferred revenue expenses to be written off over eight years or duration of the 27 [collective investment scheme] whichever is earlier. 9.3 Normal Business Expenses would include: Registrar services for transferor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edicines and other maintenance. Cost of artificial insemination. Lease rentals paid for land and for any other assets directly attributable to livestock development. Depreciation and maintenance of fixed assets directly attributable to livestock development. Any other expenses directly attributable to livestock development. These expenses should be accounted as Livestock Development Expenses . They should be disclosed as a separate item appearing between Fixed Assets and Current Assets in the balance sheet. (Reference is invited to Paragraph 5.1). 2.2 Valuation of livestock development expenses and provision for diminution in value would be in the same manner as in respect of crop development expenses which is discussed in Paragraphs 5.2 and 5.3. 3. Livestock Trading 3.1 Separate quantitative information should be maintained in respect of livestock that is procured for resale without being used in rearing/development activity. An annual trading account should be prepared in respect of Livestock traded during the year (which shall be exclusive of Livestock under rearing/development). 3.2 A suitable annual charge should be made in respect of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount Cash on hand Sundry debtors, distinguishing between good and doubtful Inventories Outstanding and accrued income Advances recoverable in cash or kind Deposits Others V. Deferred revenue expenditure The following should be disclosed: Opening balance Additions during the year Amount amortised during the year Closing balance VI. The debit balance in Profit and Loss Account, if any, shall be brought out 2.2 Liability side of the balance sheet Liabilities in the balance sheet shall be grouped into the following categories: Unit Capital Reserves and Surplus Current liabilities and provisions I. Unit Capital Unit capital (including number of units and face value per unit) II. Reserves Surplus The following should be separately disclosed: General reserve Revaluation reserve Special reserve Any other reserve (disclosing its nature) Surplus in Profit and Loss account III. Current liabilities and provisions (a) Current Liabilities The following should be separately disclosed : Sundry creditors Statutory liabilities Bank account overdrawn as per books Unclaim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Balance Sheet, Profit and Loss Account and Revenue Account. The auditor shall report to the Board of trustees and not to the unitholders. 6.2 The auditor shall state whether:- (a) he has obtained all information and explanations which, to the best of his knowledge and belief, were necessary for the purpose of his audit, (b) the Balance Sheet, Profit and Loss Account and the Revenue account are in agreement with the books of account of the 36 [collective investment scheme]. 6.3 The auditor shall give his opinion as to whether: (a) the Balance Sheet gives a true and fair view of the schemewise state of affairs of the 37 [collective investment scheme] as at the balance sheet date, and (b) the Profit and Loss Account gives a true and fair view of the surplus/deficit of the 38 [collective investment scheme] for the year/period ended at the Balance Sheet date, and (c) the Revenue Account gives a true and fair view of the schemewise surplus/deficit of the 39 [collective investment scheme] for the year/period ended at the balance sheet date. ********* 1 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asic fee shall not exceed: (i) 1.00 per cent each year of the funds raised under the 7 [collective investment scheme] for the first five years of operation of the 8 [collective investment scheme]; (ii) 1.25 per cent each year of the funds raised under the 9 [collective investment scheme] for the next five years of operation of the 10 [collective investment scheme]; (iii) 1.50 per cent each year of the funds raised under the 11 [collective investment scheme] for the subsequent period thereof till the termination of the 12 [collective investment scheme]. Incentive fees The incentive fees shall not exceed 25 per cent of the excess return realized over and above the indicative return as shown in the offer document (excluding the unit capital) at the time of the termination of the 13 [collective investment scheme]. In case the return at the termination of the 14 [collective investment scheme] is less than or equal to the indicative return as shown in the offer document, then no incentive fees shall be paid. (3) Other Expenses Only the following expenses should be borne by the 15 [collective investment scheme] namely : registrar s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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