Resource to: Valuation Examinee: Provided by: a. m. ibrahim
Valuation Examination: Securities or Financial Assets - Syllabus
Topics
|
Score
|
Valuation Application; Equity / Business Valuation; Fixed Income Securities, Option Valuation, valuation of other financial assets and liabilities, Intangible assets, and valuation application-situation specific
|
33
|
General laws & Judicial pronouncements
|
18
|
Application of Valuation techniques
|
14
|
Laws & Regulation relevant to Financial Assets Valuation
|
10
|
Over view of valuation
|
5
|
Valuation approaches & Methodologies
|
5
|
Professional ethics & standards
|
5
|
Macro Economies
|
4
|
Basic concept of finance, Decisions in finance, Finance Markets, Securities Markets
|
3
|
Financial Statement analysis
|
3
|
Total Marks examinee can score
|
100
|
Theory of Businesses, Business Interests and Financial Instruments valuation: .....
The Companies Act 2013 and Rules:
Tax Laws & Rules > Acts > Companies Act, 2013
USEFUL LIVES TO COMPUTE DEPECIATION See part 48 in the above website
SCHEDULE II 15
(Seesection 123)
USEFUL LIVES TO COMPUTE DEPRECIATION
PART 'A'
1. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.
2. For the purpose of this Schedule, the term depreciation includes amortisation.
3. Without prejudice to the foregoing provisions of paragraph 1,—
16[17[(i) The useful life of an asset shall not ordinarily be different from the useful life specified in Part C and the residual value of an asset shall not be more than five per cent of the original cost of the asset:
Provided that where a company adopts a useful life different from what is specified in Part C or uses a residual value different from the limit specified above, the financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice.]
17a [ (ii) For intangible assets, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a company is not required to comply with the Indian Accounting Standards (Ind AS), it shall comply with relevant Accounting Standards under Companies (Accounting Standards) Rules, 2006], except in case of intangible assets (Toll Roads) created under 'Build, Operate and Transfer', 'Build, Own, Operate and Transfer' or any other form of public private partnership route in case of road projects. Amortisation in such cases may be done as follows:—
(a) Mode of amortisation
Amortisation Rate |
= |
Amortisation Amount |
× 100 |
Cost of Intangible Assets (A) |
Amortisation Amount =
Cost of Intangible Assets (A) |
× |
Actual Revenue for the year (B) |
Projected Revenue from Intangible Asset (till the end of the concession period) (C) |
(b) Meaning of particulars are as follows :—
Cost of Intangible Assets (A) |
= |
Cost incurred by the company in accordance with the accounting standards. |
Actual Revenue for the year (B) |
= |
Actual revenue (Toll Charges) received during the accounting year. |
Projected Revenue from Intangible Asset (C) |
= |
Total projected revenue from the Intan-gible Assets as provided to the project lender at the time of financial closure/agreement. |
The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over the concession period.
Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period.
(c) Example:—
Cost of creation of Intangible Assets |
: |
Rs. 500 Crores |
Total period of Agreement |
: |
20 Years |
Time used for creation of Intangible Assets |
: |
2 Years |
Intangible Assets to be amortised in |
: |
18 Years |
Assuming that the Total revenue to be generated out of Intangible Assets over the period would be Rs. 600 Crores, in the following manner:—
Year No. |
Revenue (In Rs. Crores) |
Remarks |
Year 1 |
5 |
Actual |
Year 2 |
7.5 |
Estimate* |
Year 3 |
10 |
Estimate* |
Year 4 |
12.5 |
Estimate* |
Year 5 |
17.5 |
Estimate* |
Year 6 |
20 |
Estimate* |
Year 7 |
23 |
Estimate* |
Year 8 |
27 |
Estimate* |
Year 9 |
31 |
Estimate* |
Year 10 |
34 |
Estimate* |
Year 11 |
38 |
Estimate* |
Year 12 |
41 |
Estimate* |
Year 13 |
46 |
Estimate* |
Year 14 |
50 |
Estimate* |
Year 15 |
53 |
Estimate* |
Year 16 |
57 |
Estimate* |
Year 17 |
60 |
Estimate* |
Year 18 |
67.5 |
Estimate* |
Total |
600 |
|
'*' will be actual at the end of financial year.
Based on this the charge for first year would be Rs. 4.16 Crore (approximately) (i.e. Rs. 5/Rs. 600 × Rs. 500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/Rs. 500 Crore × 100) is the amortisation rate for the first year.
Where a company arrives at the amortisation amount in respect of the said Intangible Assets in accordance with any method as per the applicable Accounting Standards, it shall disclose the same.]
More information in Part 48 of
Tax Laws & Rules > Acts > Companies Act, 2013
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