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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 ..... 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 further that Collective Investment Management Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velling, 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 the amounts spent should be accounted on the same basis as mentioned in Paragraph 3.2 and the disclosure requirements mentioned therein will also apply. 4. Fixed Assets (other than land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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 NRV, these expenses should be valued At Cost and a suitable disclosure to that effect should be made in the financial statements. These expenses will be set off against income arising from the sale of crops, either in stages or at the terminal poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff/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 approved by trustees. These expenses shall be treated as an expense of the year in which they are incurred and written off to the Profit and Loss Account. 10. Returns to Investors 10.1 Interim Returns to investors in respect of CIS can be paid only out of the distributable surplus of the CIS. Interim Returns can be paid only in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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-products at the year end (i.e., manure in case of Goat, eggs in case of Poultry etc.) should be carried at lower of cost or market value . 4.2 Cost of by product shall be calculated on the basis of specific cost incurred on the by-product after the point of separation to make it marketable. PART III -FORMAT OF FINANCIAL STATEMENTS Basic Framework relating to Financial Statements 1. Scheme wise financial stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (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 account 3.1 Income The following should be separately disclosed: Surplus on Sale proceeds from crops Dividend Interest Profit on sale/fixed assets and investments Sale of residuals and scrap Other income (indicating nature) 3.2 Expenses and losses: The following should be separately disclosed: Crop development expenses also disclosing each major item of expense under this head Provision for doubtful debtors and other assets Loss on sale of fixed assets and investments Management fees Trusteeship fees Registration and local charges Audit fees Repairs and maintenance Deferred revenue expenses written off Depreciation of fixed assets Registration fees Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted 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 Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014. 25 ibid. 26 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014. 27 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014. 28 ibid. 29 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014,w.e.f. 9-1-2014. 30 ibid. 31 ibid. 32 ibid. 33 ibid. 34 ibid. 35 ibid. 36 Substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2014, w.e.f. 9-1-2014. 37 ibid. 38 ibid. 39 ibid. 40. Substituted vide Notification No. SEBI/LAD-NRO/GN/2022/84 dated 10-05-2022 before it was read as, PART I -CEILING ON EXPENSES The expenses incurred shall be subject to a ceiling as specified below : (1) Initial Issue Expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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