 So today I know there was lot of queries yesterday even after the class there were 4 or 5 major points. First let me share those points and I will be covering all those points here today. First was how to deal with e-journals right, there can be two ways if you are paying the lump sum amount then what happens if you are paying not a lump sum amount but every year there was a query from the one institution that we pay every year then what happens. Second query was so even IIT Bombay said we are there are lot of assets which we generally create out of the funds how to manage those which already most of the institution when I was going through the annual report you guys are doing it that these are the assets which have been created out of project funds. Third query was the library books let's suppose the books have been depreciated but they are of useful use how to treat them then there was a fourth query so the interest point which I hope was miscommunication was clarified so apart from this there was one more query which was generally asked from the new institutions if we are being given temporary space like let's say I am Rautak is there I am Raiapur hai so new IITs bane hai. So what happens let's suppose we have been given some funds and create the asset and once the building is ready then those assets will be transferred then what happens. All these queries will be handled today. Vakshi sir this is for you only. Yesterday I had a request that sir some sessions are relevant to us but some are not like AS13 because generally investments mainly are institutions ka doh ut hai. Ek PF ka hai ek NPS ka hai plus mainly largely they are doing it in banks FD plus kuch jo funds ka ut hai those are specific fund investments. The query was ka ye to hot normal hai we are mainly interested to know about AS11 that is foreign exchange if some student is paying some grant we are receiving some assets we are creating through the foreign exchange and how to create them when I was going to the annual report of some of the institutions they are largely using that rate which is available on the day of transaction. If let's suppose I am the foreign student and I have paid in dollars then whatever is the dollar rate on that day we are using that even AS11 b hi ka tha spot rate but there was a query as per request ki sir poore session mein 5 days ki workshops mein 4 days ki workshops mein there is nothing about AS11 so that we can look at it. Perik is AS17 ke baare mein aaza so let's suppose if we want to show our result differently this is from the let's suppose chemistry from physics research workshops consulting and how to do that ok so ye hum ek neya session plan ka. Respect of the use of accounting standards nobody I think other than 17 or 18 new student nobody has taken care of it nobody has given reply to me. So this foreign exchange there are particularly few new student IIT I am they are also getting donation we asked in many places whether they are getting in or maintaining their donation from the Anupadai in foreign exchange you can open foreign exchange account or maintain it I did not get any feedback from anybody rather there is a tendency to hide in many places in earlier survey I specifically asked how many funds you are maintaining. So in few cases some people suppressed information some people suddenly came up with information and later on denied it like that. So if you do not I mean truth and fair point is coming in your policy if you do not play truth and fair game so what happens so that is why this AS11 was not taken AS17 I think related party. No AS17 relates to segmental reporting. So you see we took up there is a reason also that now the school sector is having that problem. So we also invited people from the school sectors except one CBC representative nobody has come so that is why it was kept it is not that but you should come forth to it so that we can plan it however I will request the speaker if possible he can make adjustment in the schedule so he can speak on and he can talk on. So apart from that there was some two or three written queries also. Even those all points I will be covering it today in the session right it will go slowly because in today's class there will be a lot of practicals yesterday sir you said that the annual report is available on your site suddenly I checked your site also today. There are 12-13 records but online records available it is very good but that shows it transparency also it means that 13-14 records must be in progress right. So I will be because whenever we discuss here our purpose is not to pinpoint anything but the purpose is at least we can have a uniform policy so that anywhere if any institution is facing a problem at least no other should face it the target of these four or five is only that at least maybe it may take one year two years and when I went back I had a long discussion with Mr. Bakshi also I understand it is very very tough for any institution right from day one to immediately change their pattern the thing which you have been maintaining for last 10 years 15 years and immediately just shifting to a new part it is not a new thing it just making some minute changes some adjustments and if you remember yesterday when I started my session I started with a first thing that this reform has already been done in the local government level even they have taken at least 10-15 years to come at this level but now when they have reached at this level you won't believe it they are raising their own funds. Take the example of Ahmedabad. Ahmedabad was the first body to come out with the municipal bonds. There can be a possibility in future maybe if you have your financial statements very good apart from the government grants you may seek the grants from any other body also or if you have other body say I mean institutions they loan and grant they first always ask show your financial results if a financial statement is proper as per the accounting standards it is very easy to take any loan. If you are seeing I am not starting with this session and I promised yesterday I will be having some chocolates so I have it today so today there will lot of calculations involved first 10 minutes there will be some exercise for yesterday's session AS1 what was the name 31 in force issued 32 so I am giving you six questions right take your five minutes you will mark the options and anyone who comes first take the chocolate morning with a sweet let's start first question second and third all six all six and then we take the reply simple MCQs multiple choice first done first slide done I'll take your review on your five minutes first concept laser okay first a right first is a next I'm not saying right or wrong I'm not saying right wrong okay then third B okay for C okay fifth B six D anyone else has any different answers sir please one more option one a 2B 3B right ma'am okay it means you are saying this one is wrong okay sir one a right for C right if B B for Bombay B for Bombay okay six D okay anyone else has a different answer different sir one a one a 2C 2C 3B 3B B B for Bombay 4C right sir 5C right sir 6D 6D okay one more one a 2C right 3B right 4C right 5C right 6A 6A okay it is giving me an heart attack I'm telling you because it's not a good sign yes sir different different okay please first a right 2C right 3D right 4C right 5C right 6D 6D okay now let's compare it then we'll see we'll get the chocolate tell you let's take one more okay one more sorry is it different is it different okay ma'am one C one C okay yes please 2D 2D 3D 4C 3C 5C 5C 6D sir please what 1D okay 2B 1D 2B very good 3D 3D 4B 5B 5B 6D okay sir to a speaker to a teacher to a mentor if you give lot of options it's not a good sign it's never a good sign if we see the first rule of accounts consistency at least this one is and if we see the first question was as per AS 1 disclosure of accounting policy should form part of people who are saying see director report please understand director will only give the report when you give the financial statement and the policies not possible and the deep part books of accounts never books of economy journal ledger they're never a part of that so they automatically are out sorry sir I was a lot as to my back work a little tension but the question was a lot of us the practical kind of me AS6 is practical I have to deal with your all your queries then second was selection of appropriate accounting policy is not based on yesterday we took an example of an up if you remember about the wife right then selection has to be simple prudence substance over form and materiality question was selection of appropriate accounting policies not based on right this is wrong because substance over form is when we took the example of that student when we took the example of that higher purchase example car loan it means out this one that this was a reason I have not even written the names also I don't know because we are here only to discuss everything at least we can learn something and we can achieve even a 1% if you can achieve it then slowly and gradually we can reach a 50% then third was fundamental accounting assumption is I give you a very easy trick CAJ and yeah yeah it may going concern consistency in a cruel so logically it goes wrong sir you are right earlier exam the rule there you're telling us I can also you're going to change my career so one two three four five chocolates are saved and we can give it the next session one two three four are still there now next is accounting standard in india issued by very good the box is up this is very very good news everyone knows at least about a guy force everyone knows it I thought he can so both are eliminated you can I mean he can't think then fifth how many accounting standard have been issued so far by ICI are in force I change that part right 31 they should be see so logically this goes this goes out last place I may not like it in force why I'm just sharing this because please understand it's not a question of just creating some competition nothing because whenever let's suppose our financial statements are prepared I have been a part of the accounting also when the order comes they generally ask these things only tell me from where you have taken it what's the basis right at least when we know all these things the basis become very very clear that confidence comes and you can reply to the auditor because accountants are only one person who cares about it or it or you can have your accounts correctly still auditor will find even one mistake always because they have some different perception we have our different perception fifth was done it then the last in which of the following area different accounting policies can be adopted yesterday if you remember to the example of sir about Maggie accounting policies of different organization can be different the question was how the accounting policy can be different area for inventory you can have a different policy for government grants you can have a different policy right because you will be doing it today I will be taking a session treatment of expenditure so all of the above has to be there it means you can have a policy for cost grand everything I was going to annual report you start with always basis of accounts then your fix asset and your revenue investment everything has to be D let's see who is the lucky one so finally no tire no tire breaker I was you were having a tire breaker question also good sir please might be a small part but we can have a clap for that is it good now to start with the major part of today's session because today again there will be a lot of calculations a lot of calculations and I can guarantee in today's session a six and a ten you will be learning lot of new things because generally I have seen the depreciation rates we have been following is a company's act and companies act be pranayawala schedule 14 honestly tell me how many of you have actually seen or gone to read companies new act 13 walla no one will be surprised to know companies act 2013 have scrap all the rates they are not even talking about the rates now earlier it was given in schedule 14 of company that and that was a minimum rate the problem which was raised yesterday by most of you did that ministry should create or provide depreciation on some assets this case rates the rates for which are not being given in the companies of the income tax act due to this company act due to this problem even they know it it is very tough for them to provide a exhaustive list of all the asset for which they can provide a depreciation very tough no one can prepare and willing you because every organization has a different asset that's the reason new companies act was very clear they said forget about the rate management knows that this is a set they say it's a asset they say furniture is a asset they say building is an asset they say roads are the asset okay agreed take it you calculate your own depreciation rate I'll be sharing this today it means now they have only given a concept of useful life scrap value and a cost use your cost use your scrap use your life and calculate it it means now you will have to calculate depreciation rate yourself no rate will be given it means from this year onwards may be next year onwards if if anyone till now was following companies act rates logically now you have to change it even a CAG auditor will say now you can't follow the old company's act because it has been scrapped next thing it means now we should know how to calculate also now we should not to calculate even depreciation rates what are the two methods generally we guys are using in our annual report state line and I'll be discussing that also today we'll be doing a lot of calculations you'll be surprised they have introduced one more method production unit method reason especially in genetics they are a lot of machine let's take example printer printer is never for the number of years these projectors I might be wrong just correct me if I'm wrong I'm not a technical guy if I switch it on for five days continuously without switching it off will it run after it it is always based on number of hours its box will go blank that's the reason when we use cameras videos video cameras at our home it is always advisable to take out the batteries bulbs it's always written it will last up to 60 hours up to 70 hours battery is always written up to 70 hours 80 hours if we charge on the basis of number of years it's the wrong concept if we are having let's suppose today it decides to have a continuous workshop for two days no break right one workshop the next workshop and next workshop this projector will not even take a break it will go off and still if we are charging a depreciation that's a 60% 25% 20% it's wrong to use it usable for me it should not be even these are the issues which will be discussing it you will be surprised to know the correct me where I'm wrong because you guys are more experienced and mean at least in your institution I remember my shiram college they have created houses for their professors houses K are they create the roads right we create a water treatment plant for their professors WTP gathescom look right what's my STP with a severe treatment plan at nowadays it means these are infrastructure assets if I am correct company's act income tax act does not specifically specify the depreciation rates for roads STPs WTP no state lights I still remember I went to Lakshadeep for one training in the entire Lakshadeep entire there was a one island there Agati Island the entire land island there they were using a solar system not even a single concept of other than solar it means a street light as a street lights been numbering yesterday I went to Bombay I was surprised to see even trees baby all street all these street lamps lamp post been numbering thing it means guaranteed they have some depreciation on that you always see any road after two years three years it is again repaired because they were like but income tax act may it am I am a right or wrong correct me I don't mind will you be surprised there is one more there is one more document which has been issued now sir would it be kept over capitalized again that would be what I have been saying issue whether repairing is capitalized or not right that will take it later it's a capitalization expenditure or revenue expenditure it all depends upon the efficiency if you take example in daily you must have heard there is an express way which has been prepared connecting no idea to Agra that entire road has been laid down again it is created with a cement even with a steel car concept was me use over it means a new road has been created it may be highway it involves huge cost and long way to go but in an institution there are few roads which needs to be repaired and again again I'll come to it revenue expenditure is that expenditure which only maintains the same level right if you think that due to expenditure due to that expenditure or some new material has been used right which will increase alive that's a 12 times or 10 times or 5 times right so there's a very thin line between revenue or capital I'll be sharing in today's discussion at present I'm just starting with the questions because when the questions are raised now at least his mind starts working something I'm not even discussing I have not even started my presentation of it because generally as a faculty I have learned when a student start thinking something and they even create some interest you will be surprised just see this sir please sir which act applies for us okay very good the point arises which act applies sir if you if I go by the current practice which most of the institutions are following some are following companies act some are following income tax act as per the government financial rules because as per you are preparing us you should have prepared as per jf or government financial rules companies act me look how clearly if any act applies to you guys and there are any separate rates given please follow that but if no other rates are being prescribed under your act up to see a wonder of act may ya kisee be act may depreciation over a male cover yes I'm put in a cover in fact the mh rd ministry or UGC cantarget to Karim Karim Pundra he a solar ya bees act honga a jiski antarget different university at the same as a lot of other city in receipt of a lot of the act 2005. Sikham University is coming under a separate act. Mijoram University is a separate act. Almost all separate activities came in 2009. Central University came in 2009. There were 12 or 15 central institutions in Rajasthan, Gujarat, Bihar, Jharkhand etc. And every act is close to each other but there is still a difference. We have worked in two or three places and I have also studied different acts. So, some places vary, regarding the statutory officers. Some are 6, some are 7, some are 8, some are academic, some are executive, some are constitution. So, it varies. And in Accounts Finance, what surprised me the most and unfortunately there is very little written on Accounts Finance. There is almost nothing written on Accounts Finance. You have to work with your prudence and you will follow the company act, the income tax, what you will do. There is nothing written on Accounts Finance. Agreed. This was the reason, sir, I asked sir to reply. Because, as far as I know, maximum acts which I have gone through, they only talk about the organizational structure. They only talk about the procedural parts of the administration. Generally, finance is always taken as the last seat. And that is the reason they believe, already companies have to hide, no? That is the reason income tax has to hide, so they will follow that rate. So, ad presidents are nowhere is being given at which compulsory you should follow. Even accounting standard nowhere says sir, abhi may be ASX karung yo. ASX says commonly method are SLM and WDV. Your choice. But you have to follow that its basis. Because statutory auditor, he will ask you first. Sir, tell me, what is the basis? Please, sir. We are from Gurga. In the last four years, four year annual account, our auditor has objected in both the act. We followed in one time, they say income tax act, we followed it. Next time, some other person came, they objected for that one also. So, we followed both. What was objection? Objection, they were telling as per some rule, you should not follow this act. You should follow the another act. Have you seen that rule, sir? If any auditor says as per the rule. As a person, duty is my duty, please show me the rules. If you are saying income tax is not applicable, show me the rule. If you are saying this rule is applicable, ask them. That's the best query, sir. I'll share, they have their own logic and they object with that logic. Well, follow sir. There is a reason, we can come to the conclusion that this act has to be followed. And here, around many auditions are there. So, we can pass on this instruction through MHR due to CAG that this act will be followed. They appreciate it particularly. Of course, sir. That's a point, sir. This is your point. Sir, you won't believe it, sir. Yesterday, when I was having a discussion with him, I was saying to him, there needs to be one instruction which should go from here. Because I agree, sir, there are a lot of acts. But ultimately, all are being covered in one ministry, no? Yes. Of course, coming under one ministry. But the act has been passed by the parliament. So, act is supreme in case of authority. Agreed. Law is agreed. Whenever law is there, act is there. But when act is silent, then logically, ministry can give the guidelines, follow this act. But unfortunately, ministry is not giving guidelines on particularly finance accounts. And every finance officer or finance said they have to do on their own prudence whatever they like. So far, objection by the auditor is concerned. Auditor objects, but they have no solution. Because in our university also, I am from Allahabad University, no depletion has been charged. Okay? No depletion has been charged. I have read your… Yes, yes. Then I asked, okay, we will charge the depletion. Just tell me whether it's state-lined or written down. Plus that I don't know. Then what do you know? Whatever you like, you can do. Yes, ma'am, please. Yes, ma'am. So, first thing, the university is exempted from payment of income tax. It's a non-profit-making organization that is one. Yes, we follow the income tax rates within. But the depletion rates are not the maximum rates prescribed in the income tax we are within. You see, as per my understanding, the rates given in the Table in the Income Tax Act is for rebate for tax assessment. But we don't pay income tax. That is one point for sharing. And so I don't think we have to go to the maximum because see, when we have buses for students, it is not really… The depletion rates goes up to 60% if I remember correctly in that table. It can… Maximum can be 60% for commercial vehicles. But our vehicles are not commercial vehicles. We are not a commercial institution. So I think it's our prudence that we should not go up to that maximum. And again, this one in the buildings, if I remember correctly, buildings of wooden bamboo, these are 100% deportation. So the audit, yes, when we have constructed some bamboo hats from the National Bamboo Mission, why no depreciation rate… why no depreciation was provided on them? So since we are taking the shelter of the Income Tax Act, it says we are building out of… from wooden. Anything below wooden, no? So there's no depreciation on those. We are 100%. I agree. That is the reason. Is it perfectly… There's a lot of confusion if we go by the income tax. I agree because she has put it in the right words. If you just follow, let's say, one act, sometimes just to follow one act blindly without even the logic, we'll create a problem for you. This is a reason that company's act has removed the rates. And trust me, day is not far behind. Let our Income Tax Act get revised. Direct tax code is about to come. Even they will also remove or at least give the standard rates and apply the logic. Because companies that have given a very good logic use their useful life, use the cost, and calculate the rate yourself. Sir. You just explained the concept of the depreciation which has come recently, that useful life and scrap value and the cost of the item. It may be building or furniture. But point is that whether it will be universal in all cases, because some of the institutes will be located in coastal areas where corrosion value will be more. So there can be an institution where units are located, headquartered Delhi or Mumbai, and some centers located in Port Blair or Lakshadeep, etc. So there the useful life will vary. In that situation, the organization will be permitted to have different kinds of depreciation rates within the same organization. I will show you again. Even this point I have included in my presentation. Alliance. One company charges four different depreciation for different units. It has to be. This is a very valid question. Many of the organizations having units at different locations. The useful life will certainly vary from place to place. 100% will vary, 100%. And when we will compile and when we will incorporate all those units' accounts in main account, the rates, I don't know how to reflect the rates, because there presently we are writing that rate is common for all the units in the accounts. Now how to reflect those differential rates in annual account? It will be very tough to write all the rates. Just write. I will just give it. I have started writing down your suggestions. Few suggestions. Yesterday I received one. There should be one software for all. Then uniform accounting policy. Then uniform depreciation rate. Then another suggestion came. Whether they should get CAG. Then somebody says a letter from CAG should come. Then another suggestion came. Regional workshops. So already I have started noting down your sentiments. But we come forward. Give all your suggestions. But some of them we can work on. Many of them we may not task at all. Like depreciation. We may not task it at all. Because of your autonomy and divergent requirement. No IM will follow. If I say you follow WDM. Many of them we are following a straight line method. So everybody has their own logic. Then we cannot also prescribe uniform accounting policy. One thing can be decided. Mainly we have two accepted depreciation policy methods. Straight line and written down. It can be decided by the ministry whether to follow this one or that one. So Faraj I think no institution in India will have any objection in it. To following either a straight line or written down. They will be welcoming it. At least have a one. No sir. What will happen is that there is a uniformity in all of India. And no institution will have any objection as far as my discussion with other fellow members. I am also heading financial. Accounts rule and comparability. And what will happen in this? The one who follows the SLM will have a profit. The one who will do WDM will have a profit. Mr. Boxer it is that when you decide a policy from the ministry we will not have to think too much. There are not many people who think too much in institutions. We should not mind apply to all places. Some places where you can easily take decisions. You take the decision just issue a circular. Just we will follow. What is the kind of assets in India? Whether it is in Nagaland or in Lahawaj. One thing one offers for the guideline. Actions sir. What will come up? We do all suggestions. Rates. Rates are very difficult. Of course, what you did in the new company act to decide the rate. I will come to it. I will come to it. I have left it on management. I will come to it. Sir, the last year our audit is the same problem as the year. Because that time disaster was in Uttarakhand. So whichever policy you are following get it approved from your board and finance committee. And we have done that. In this financial year we are applying. Which year do you want to be? Basically, as per our requirement and as per our decision, we follow both income tax and the company act. But we have prepared separate items. Uttarakhand? Yes sir. For example, let's say here. Why the rates are not possible ma'am? Let's suppose they have to prepare the balance sheet and the income expenditure for the last year when there was a cyclone. So logically, maximum assets have taken a lot of erosion you can say or a depreciation. Still, if you think no, I will still apply SLM. Ten percent. I am seeing that the computer has almost destroyed. Still, if you are applying 10 percent SLM because the law says law always says the minimum rates. Income tax rates are to be given just to claim the income to the rates. Nothing else? I agree. Sir, that's the reason I am saying rates cannot be predefined. Rates cannot be predefined. And sir, I said you can add also for me. Whatever policy you are following, get it approved from your board. They are very simple. See, in my last 13 years I have met a lot of auditors. They never say they always go by the papers. If it is be approved with some rules, they allow it. Sir. The point is that what I asked whether within the same organization differential rates can be... I agree, sir. And this will be a challenging area for the software which is being prepared. Absolutely. Because differential rates are there compilation of the account at the headquarters. Sir, tough air. See, law never stops you. Tough air. It doesn't stop you. To simplify. Please don't take otherwise. Just to simplify our work. We say, okay, let's go by only one rate. Some of the organizations under MHRDR are having single units. But many of the organizations are having multiple units located in different parts of the country. If they start following differential rates, that will be a real challenge in compilation of account. Sir, it will be a challenge. But it's just starting in two years. One or two years. You are right. Sir. Can we come to the consensus over here for WDM and SLM, at least? It's a major difference in that. If we come, at least for this house, we can have one consensus. We'll take it after the presentation is over. Because there are a lot of new points. I'm telling you, there are a lot of new points. A lot of new points. Sir, my request is, government is an organization to charge the depreciation only to show the true and fair value of the asset. Right. Not getting any benefit from the charging depreciation from the income tax. Right. So, only the issue showing the true and fair value, it is better, government of India say, either these are these, only for the purpose of satisfaction of the auditor. Why you are charging this method? Why you are charging this method? Right. Otherwise, in my opinion, no any benefit from charging depreciation to government organization. For the scrap value, we can purchase the new versionary after the scrap of that versionary. The reason is, creating a fund from the depreciation. We can purchase. Why purchase? You are creating fund from the government grant. Depreciation. I think the government not permit to maintain any depreciation fund. See, depreciation means the sinking fund method is very different. Sinking fund is given but not as per the income. But still you follow me? Sir, as per my experience, the rate of depreciation has to be approved by the board of governors of the respective organization and prior to that, their finance committee. So it is not necessary that every organization has to follow the same rates. It depends on the organization to organization. And I also served four organizations and there are different rates in all the four organizations. At present I am working in the NITI. NITI rates are different and previously I was working in TIFR Colava. So TIFR was having different rates. So it has to be approved by the respective BOG. And their ministry will definitely not object for that because the financial advisor is part of the BOG member. So it is not essential that every autonomous body has to same rates. That is my experience. See, rate even ministry will not be able to give you the uniform rates. Because let's suppose they are giving the rates. Take the example of here. Every organization has different units, different assets. Rates cannot be given a list. But at least the method can be given. The major there are two requests from everyone. First, a letter to a CNAG. Right? And second is let's suppose any clarity about the depreciation. So let's proceed these two requests. Only two requests. Rate of depreciation would be finalized by Board of Governors or Executive Conservatives. So this is the time to finalize the accounts. The rates are not approved. So what would be the depreciation in the final? Which we are going to for 13-14 years. You are an autonomous body you are going to ask the diet to do it. No sir. No, no to press. So we do not know the total rate. What to charge the depreciation. So rate is equal to the decision. No. But this is how This was the reason before I started this, I have created some questions. Now at least we can look about the points, about AS, your point different rates, your point about the methods, your point whether we can apply the depreciation if we have not provided last 20 years, there was a query from one of the institution without naming anyone that we have not charged depreciation for last 20, 30 years and if today we charge the depreciation then the total amount is more than 150 crores, should we charge it, if we charge it then our income expenditure does not show surplus, it should be efficient, how to deal with such point, all such queries are being covered here.