1.3  Query:          

Disclosure of Fixed Assets on Revaluation.

1.The fixed assets schedule of a company as on 31.3.1989, is as follows:                                                                                                                                                                                                                                                                                        (Rs. ’000)

2.  During the year 1989-90 the fixed assets were revalued as follows:

3. The querist has sought the opinion of the Expert Advisory Committee on the following matters:

(i) How fixed assets are to be shown in the balance sheet after revaluation, and whether the following disclosure is in order.

Fixed Assets

Gross Block -

                                                Less: Depreciation                             -

                                                Add: Net Addition on Revaluation            -

(ii) How these revalued figures are to be shown in the fixed assets schedule, when gross book value and the accumulated depreciation on such assets are not available?

                                                                              Opinion                                     May 6, 1994

1. The Committee notes that Para I of Schedule VI of the Companies Act, 1956, lays down that in case the fixed assets are revalued upward or downward, every balance sheet for the first five years subsequent to such revaluation shall show the date of revaluation and the amount of increase or decrease consequent to revaluation.

2. The Committee also notes paragraph 6.3 of Accounting Standard (AS) 10 on ‘Accounting for Fixed Assets’, issued by the Institute of Chartered Accountants of India, which is reproduced below:

“6.3 Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account or financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value.”

3.  The Committee notes paras 19 and 27 of Accounting Standard (AS) 10, which recommend, inter alia, as follows:

“19. The gross book value of a fixed asset should be either historical cost or revaluation computed in accordance with this standard…..”

“27 When a fixed asset is revalued in financial statements, an entire class of assets should be revalued, or the selection of assets for revaluation should be made on a systematic basis. This basis should be disclosed.”

4. The Committee is, therefore, of the opinion that the manner of presentation of fixed assets, mentioned in para 3(i) of the query, is not correct. The revalued amounts of each class of fixed assets are presented in the balance sheet separately, by restating both the gross book value and accumulated depreciation so as to give a net book value equal to the net revalued amount. It is not correct to net off the increase/decrease in net-book value arising from revaluation of various classes of fixed assets, i.e., machinery and building.

5.The Committee also notes from the facts of the query mentioned in paragraph 1 that both the figures, i.e., gross book value and accumulated depreciation are available. In view of this, the query in this regard appears to be hypothetical. Since the Expert Advisory Committee does not answer such questions in view of Rule 3 of the Advisory Service Rules, it refrains from expressing an opinion on this question.

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