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TMI BlogAccounting Norms, investments and expense ceilingX X X X Extracts X X X X X X X X Extracts X X X X ..... 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), trustee or any other entity or through any other route: Provided f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment 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 impairment losses should be provided for. 3.6 In case such assets are taken on lease, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed 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 extent such a provision was made in the past. The basic principle of valuation at lower of Cost or NRV, would still hold good every year. In case the crop is at such a stage that it is not possible to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. * 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 of units sold or redeemed * CIMC and trustee Fees * Depreciation * Audit Fees * Subsequent Rating and Appraisal Fees * Listing Fees * Other costs, (if any), which are incidental for the operation of the 28[collective investment scheme], as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of maintenance etc. of the livestock which remained for trading purpose only. The cost of maintenance etc. to be charged to the livestock trading account shall be calculated on the basis of quantitative proportion of livestock held under rearing/development and for trading. 4. Valuation of by-products 4.1 Inventory of by-pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 * Unclaimed distributed income * Others (b) Provisions The following should be separately disclosed: * Provision for gratuity * Proposed income distribution on unit capital * Provision for taxation * Other provisions IV. Contingent liabilities Disclosure should be made of all contingent liabilities, showing separately the nature and amount of each such liability. 3. Contents of scheme wise Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment 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. ************** NOTES:- 1 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014. 2 ibid. 3 ibid. 4 ibid. 5 ibid. 6 ibid. 7 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014. 8 ibid. 9 ibid. 10 ibid. 11 ibid. 12 ibid. 13 ibid.. 14 ibid. 15 ibid. 16 ibid. 17 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014 18 ibid. 19 ibid. 20 ibid. 21 ibid. 22 ibid. 23 ibid. 24 Substituted by the SEBI (Collective Inve ..... 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