1.15  Query:

Disclosures regarding revalued fixed assets.

1. The querist has quoted the following disclosure requirement regarding revalued fixed assets under paragraph 39(iii) of Accounting Standard (AS) 10 on ‘Accounting for Fixed Assets’, issued by the Institute of Chartered Accountants of India:

“39(iii) revalued amount substituted for historical cost of fixed assets, the method adopted to compute the revalued amounts, the nature of indices used, the year of any appraisal made, and whether an external valuer was involved, in case where fixed assets are stated at revalued amounts.”

2. The querist has also quoted the following ‘Instructions’ to prepare balance sheet as per Part I of Schedule VI to the Companies Act:

“Where sums have been added by writing up shall show the increased figures with the date of increase in place of the original cost. Each balance sheet for the first five years subsequent to the date of writing up shall also show the amount of increase made.”

 

3. The querist has sought the opinion of the Expert Advisory Committee on the following issues arising from the above:

(i) Once the period of five years from the date of revaluation has elapsed – whether the entity would still be bound to disclose all the information stated in para 39(iii) of AS 10.

(ii)   If yes, then for how many years the disclosure is contained by AS 10.

                                                                             Opinion                             November 1, 1995

1. The Committee notes the relevant disclosure requirements in case of revaluation of fixed assets as laid down in Accounting Standard (AS) 10 on ‘Accounting for Fixed Assets’, issued by the Institute of Chartered Accountants of India and instructions in Part I to Schedule VI to the Companies Act, 1956, which are reproduced in paras 1 and 2 of the query, respectively.

2. The Committee further notes that AS 10 does not specify any time limit regarding the disclosures to be made in respect of the revalued fixed assets. Therefore, such information should be disclosed as long as the relevant asset continues to appear in the balance sheet at the revalued amount. The Committee also feels that since the accounts are basically prepared under historical cost convention, disclosure of information pertaining to revalued fixed assets required in para 39(iii) of AS 10 is imperative for meaningful understanding of financial statements.

3. On the basis of the above, the Committee is of the following opinion in respect of the issues raised at paragraph 3 of the query:

(i)  Yes, so long as the relevant asset continues to appear in the balance sheet at the revalued amount, the entity is required to disclose the information stated in para 39 (iii) of AS 10.

(ii)   Please see (i) above.

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