1.18     Query

Location of fixed assets under MAOCARO, 1988.

2. All the units of the company are independent accounting units. The company has at least five very big accounting units, i.e., Mines, Refinery, Smelter, Captive Power Plant and Port facilities.

3.The Government of India has recently promulgated Manufacturing and Other Companies (Auditor’s Report) Order, 1988. As per paragraph 4(A)(i) of the said Order, the auditor is required to comment: ‘Whether the company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets; whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so whether the same have been properly dealt with in the books of account.’

4.In view of the sheer size of the units and frequent movement of furniture and fixtures and office equipments, it is not considered practical to maintain department-wise record of small value items like furniture and fixtures and office equipments in Fixed Assets Register. However, the Administration Department of the company keeps track of the movement of these items, from one department to another. Therefore, the company had decided to indicate name of unit as the location for furniture and fixtures and office equipments in Fixed Assets Register. The auditors of the company are of the view that the company should indicate department-wise break up of furniture and fixtures and office equipments in each asset card.

5.As furniture and fixtures and office equipments form a negligible percentage of total fixed assets of the major accounting units of the company and in view of practical difficulty explained above, the company is of the view that it will mean sufficient compliance with the provisions of paragraph 4(A)(i) of the Order, if the company mentions the name of the unit as the location in respect of furniture and fixtures and office equipments. The company has also clarified that location in respect of furniture and fixtures and office equipments located in the club, guesthouse, community centre, schools, etc., is being clearly indicated in the Fixed Assets Register. The querist has sought the opinion of the Expert Advisory Committee as to whether the records maintained by the company in respect of fixed assets as aforesaid are proper as per paragraph 4(A)(i) of MAOCARO, 1988.

                                                                                                 Opinion                                  November 23, 1989

1.The Committee notes paragraph 27(e) of the ‘Statement on the Manufacturing and Other Companies (Auditor’s Report) Order, 1988’, issued by the Institute of Chartered Accountants of India, which states, inter alia:

“The purpose of showing the location of the assets is to make verification possible. There may, however, be certain classes of fixed assets whose location keeps changing, for example, Construction equipment which has to be moved to sites. In such circumstances, it should be sufficient if record of movement/custody of the equipment is maintained.”

2.The Committee is of the opinion that in respect of certain items of furniture and fixtures and office equipments which are moved frequently, indication of the name of the unit in the Fixed Assets Register would amount to maintenance of proper records under paragraph 4(A)(i) of MAOCARO, 1988. Since the movement of the aforesaid assets is frequent, the Committee feels that it would be desirable that the company also maintains proper record of movement of these assets, e.g., an Assets Movement Register.

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