1.66     Query

Presentation of silver rupee coins etc. in the

Balance Sheet.

 A public limited company has in its possession 500 silver one-rupee coins, and one-paise copper coins of Rs. 25/- which are used for Diwali Puja.  The face value of these items is shown in the Balance Sheet as part of cash-in-hand.  The company also possessed one guinea which is also used for puja purposes.  The purchase cost of guinea is shown under “advances recoverable in cash or in kind account”.

   We understand that these items are considered as sacred and at no point of time, the company proposes to sell the same. In our opinion, the accounting treatment by the company of these items is not correct.

 We seek your advice as to the manner in which these items should be shown in the balance sheet of the company.  The question of showing the market value of these items may also be considered.

                                                                    Opinion                                                            January 8,  1981

  The coins mentioned in the query are not held for use as a legal tender and as such should not be shown under cash-in-hand.  Nevertheless, these are valuable assets held by the company for its annual Diwali Puja and not for sale or disposal.  Thus these coins are of the nature of a long-term asset and the only benefit that accrues to the company, apart from the satisfaction of Puja, is the accretion to their value due to increases in their metal prices.  Accordingly, in the opinion of the Committee, these can be shown at cost (under the historical cost basis of accounting) under an appropriate sub-head like ‘Old coins for Puja Ceremonies etc.’ below Fixed Assets, on the assets side of the Balance Sheet.  Since the company does not intend to sell these coins, it would not be appropriate to show them under any of the “Current Assets” heads.

   Alternatively, they could perhaps also be grouped under an appropriate sub-head under the main head “Investments”.  However, it may be argued that assets held by a company which are classified as Investments are generally held for the purpose of earning income and no cash return is expected on these coins.  Therefore, in the opinion of the Committee, it is better to show these assets under the head ‘Fixed Assets’.

   Under the generally accepted accounting principle relating to the valuation of long term assets under the historical cost system of accounting, they should be valued at cost, less an appropriate deduction for depreciation wherever applicable.  Since presumably, no diminution in value takes place through either use for puja or through efflux of time (and in face the market value probably goes on appreciating), no provision for depreciation appears to be necessary, in the case of these assets.

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