 Basically, this was a part of AS-12, but AS-10 may mention, that is why I am taking it here. Your major query is here, no depreciation, charge on asset or asset is purchased from government funds. This was a query from another institution. First, let me complete and this was a query and now if we charge, there will be a huge loss. Now, what is the reply for this? AS-12 talks about these two methods. I will go very slow in this. One is the gross. Gross method is known as income approach and net method is known as capital approach. Without, I have taken an example for you, gross income. It means if we have taken, we have received a grant of 80, let's say. I have not even taken 100% example. I have taken, let's say, grant is 80 and you purchase a computer for 100. When you get the grant, your entry is what? Bank to grant. I hope, you can see the first entry is exactly common. Because you are receiving the money, balance sheet, bank and grant. Then you are purchasing it, computer 100 rupees. It means 20 rupees you have paid from your own pocket. Entry is common. But third entry you can check is not common. In the third entry, how much depreciation I am charging? Tell me, how much depreciation we are charging? 10. I have assumed a 10% rate. Because fixed S rate is 100. 100 to 100 cut 10%. But kindly see, sir, kindly see in the next one, what is the depreciation amount? How much? Two reasons. Let me show this example here. Your major query will be clear now. If I have, let's suppose, purchased a computer for 100 rupees, right? And we have received a grant of 80. This is your balance sheet. You were already having 1000 with you. You were already having a fund of 1000. Agreed? Now you just received a grant of 80 rupees. Done? Now what you did? Now you have purchased a computer. We have purchased a computer here. How much amount? 100. 20 out of this. 20, 80 out of this and 20 this. How much bank? Grant of 80, 100, how we will be able to. So opening also. Sir, opening balance you must be having it now. Now, now if I prepare my balance sheet, it is what bank, 980, computer, 100. My capital fund is, agreed? This is a common. I have not even we did anything. This is a common approach. Common means this is only the first two entries. Only first two entries. Please, no one stops you. You follow any approach. Anand's section is Anand will take this. I am just taking it because it is mentioned in AS 10. Your query was in this. Now comes a depreciation rate. Depreciation rate is let us suppose 10%. Now you can have two approach. First, the easiest approach. The easiest I am telling you. And trust me, no auditor can argue this. It is given in accounting standards. The best approach is right bank, 980, computer, 100. How much was the grant? 80. Now your fund is only 1000. And this is only? Here I have a problem. Please, go ahead. This 1000 you are, you have presumed some other capitals are there. But our entire capital is out of capital grant. So in that case, we will not have any fixed asset in our books. Sir, I requested, let me complete first. I have taken that example in which at least there was a lesser amount. Let me complete this. Now the same part. If you do by this, bank 1000, same. And this is for everyone. There was a query about we are getting some funds for some scheme. We are getting the asset, anything. Now let's suppose you have purchased a computer. There was a grant of 100. There was a grant of 100. You have purchased a computer of 100. It goes from here. Agreed? So my balance sheet will be like this. Fund, agreed? I have taken two approaches. I can even take the reverse way also. There are cases when you get a more grant and you spend less. In this case, we will not have any depreciation. That's what I am saying. Let me complete first. Yes, the easiest approach. No auditor can argue this. Now follow the net approach. Net approach says, remove the computer and the grant. But because computer is with you, to have a location, to have the control of the asset, only show it at 1 rupee. Now if you prepare your balance sheet, it will be like this. Bank 1000, computer 1, fund. I can give you the paragraph of AS 12. I can give you the paragraph of AS 10. Sir. In the first case, we will not have any fixed assets in the register. Because you have assumed some 1000 as opening balance. We don't have any such opening balance. No, everything. Don't even assume opening balance. You get the grant. Yes, sir. You spend this. You get a computer. You remove it. You will have computer. Why you will not have it? But you will have it only for 1 rupee. Fund 1 rupee. This is the first approach, sir. So our balance sheet will show 1 rupee on the capital side, 1 rupee on the fixed asset side. And there won't be any depreciation. No. As per the first method. Second method, we will not have any depreciation. Second, I will come to it. First, this approach is clear. This approach is clear. Any query in this. Auditors will accept this. We don't. How it will not accept it? No, whether it will show a clear picture. Why not? It is not reflecting how much grant we received. It is not showing how much fixed assets we are having. Sorry, sir. Again, that's your way of taking it. When it is not your fund, that's the reason AS 12 clearly says it's your approach. That's a net approach. Don't follow this. If you want to go by the... Sir. Income expenditure has been added, sir. Yes. It has been added to capital. Sir, in income expenditure has been added, sir. No, no, no. Revenue grant is... No. At present, all institutions are recognizing in income expenditure. All revenue grants. Yes. Sir, wait a minute. Now, if you want to take the second approach. Second approach. Bank 100 for 100. In this, you will have income expenditure. Sorry, sir. How can this happen? How can this happen, sir? How can this happen? I will forget my accounts. Grant is taken to income expenditure. Only those grants which are for expense or income. Grants are received for five reasons. One, Air India has got bailout grant. That is taken to the income expenditure. Grant given for the income. Grant given to meet out salaries is taken to income expenditure. Grant given any for capital purpose. Any capitalized asset. Grant given for land. You can never take it to income expenditure. If you are taking it, you are making a blunder mistake. Sir, what he is saying is correct. Revenue grants are being recognized in income expenditure. There is a break up. There is a break up. Ma'am, depreciation. If you are already in the first instance, you are making it zero and showing the nominal value, then why you will charge depreciation on it? If you purchased the computer from the grant and you removed the grant and computer through net approach, then why it will come in your balance sheet? No, sir, depreciation will not come? That is the right approach I am telling you. At least no one can question you. You don't have to worry about depreciation. Sir, you have given one rupee of your asset. It is not possible. Today the government of India says that we have to close this organization. We are selling this to the private sector. The private sector will say that their asset is only one rupee. Sir, one minute. Now let me reply. Now everyone will listen for ten minutes. King Fisher Airlines today is about to be sold. A dare balance sheet that suppose shows land for 100 rupees. Is it mean that it will sell for 100 rupees? When it is being sold, it is being re-valued. These are book values. Second, you are talking about true and fair view. Let me take that. Let me take a true and fair view point. What approach you guys are following it? It is given this. Now in gross approach, get cancelled out. Now kindly listen everyone because it seems that you are following some wrong concepts here. Computer 100 for 100. Now for the first year, for the first year, this is a gross approach. Gross means I am showing both the grants, assets. Now first year I will charge a depreciation, 20%. And this fund, I will write this fund as deferred income. Deferred income means I am not using it immediately. This income is for five years itself. It will be allocated over the useful life of the asset. It means 20% becomes your income for this year. Second year, if you come, computer 80, deferred 20. So 80, sorry. Now next year again depreciation will be charged and grant 20. And you write your accounting policy. It is as per year 12. Let's have a discussion and no auditor can question this. Because it's been given the approach. It's the right approach. What's wrong in this? This grant was given for the purpose of what? Asset, specific grant. You have used it. So logically either you use it, showing the books immediately or show it over the period. Tell me what's wrong in this? How many of you are following? How many are following the gross approach? Gross approach, one. Second. Third, gross approach. Four, five, six. Nobody following that approach. All right. This is the reason. Please, sir. We are charging depreciation of rupees 20 of the income and expenditure account. But the way you are showing a grant 20 in the credit side of the income and expenditure account, we are not doing that. What we are doing, whatever deficit is there on account of this particular depreciation, because every year there is deficit, that is excess of expenditure over income, we are transferring it to the capital fund. That's what we are doing, sir. Please clarify. It means not here, right? Deficit, right? And this deficit, you are writing capital of 100. Yes. Agree? Sir, accounting effect is same, but if you go by AS-12 illustrations, that's the wrong approach. AS-12 clearly says, and we'll be explaining it, it's a deferred grant. First, deferred is what? It's an expenditure which we have incurred it, but for how many years? Over the usefulness of the asset. Accounting effect, both the same. Both the same. The difference is you have not taken it to the income and expenditure account. You have taken the net effect to the capital fund. In your approach, there is one problem. Deferred grant, how much is for grant? How much is for capital fund? It's not separate. In the approach which I have taken, which is as per AS-12, capital fund is separate and deferred grant is separate. At least you can identify this much grant has been used on account of depreciation. This is still left. That's the best way, because that's the reason Euter raises a query. In your balance sheet, if you see it here, it is not clear that how much is capital fund and how much is deferred grant. If let's suppose I have an opening balance and I mix it everything, and I mix everything here. Difficult. But if I write it here, capital fund separate and deferred separate, or easy reasons AS-12 is written here, open a deferred account and amortize it over 5 years or 6 years or over 7 years. They say over the life of the asset. Very clearly. And the query, which was there, it's a very common query. There was a query from everyone, not here even from local government also. Sir, if we show everything at rupee 1, then our balance sheet will only show rupee 1. So what? So what? If in future let's suppose government decide for disinvestment, the government will be selling the asset at the actual market price. They will be getting the actual market price. Who stops? It's your no one forces to follow only net approach or gross approach. But in gross, you will always have a problem with depreciation. Then that query will come, sir, income tax, sir, useful life. If you want to follow simple and straightforward approach, you, no one stops, you prepare, fix as a schedule just for disclosure. Make it for disclosure that this is my asset's value, real life value. There was a one animal report, I won't name again. There are some assets in it. Depreciation was charged on it. But it has not been showed in the fixed asset. The reason? The reason was that their ownership was not transferred. But they still prepared the schedule. It's a fixed asset, it's a depreciation, it's a book value. So in net approach, no one stops you to give the additional disclosure. You prepare a schedule, but the impact of that schedule will not come on your income expenditure. It will not come on balance sheet. If it has not come on income expenditure, if it has not come on balance sheet, no auditor can question it. And the best part is, it has per year as 12. The best example is this. Then the approach is exactly what you are doing now. I told you in the treatment, there was a lot of things. I'll take one very simple new point for you, which is applicable for you, especially the 105 years. Tell me about this. It's a new point. First, this is a very good flow chart to value any asset. I'm reading everything. We have prepared for the Ministry of Urban Development. It talks about all the possibility of the asset. If I go for the first one, now kindly everyone, they can focus it. First it says, was the asset received as gift? If yes, value to P1, over. I'm telling you this flow chart will solve all the queries. This we have prepared by a lot of efforts in 2009. It's an official document now. Then, if it is not received as a gift, if it is not received as a gift, you have purchased it, you have constructed it, like in IIT, you create a lot of assets, is the cost of the asset available? This means that you purchased the car yourself. You didn't get a gift. Do you have the bill? If yes, show it at the cost. Finish. This entire I'll be giving it to you. Don't worry. It's available on the net. It means there are a lot of assets. Talk about it, sir. He was saying his institution is 105 years old. So logically, there will be a lot of buildings, a lot of furniture, for which even you don't know about the purchase bill. You don't know whether it was purchased or gifted. Then we'll look, there's one more method in this. Is the year of purchase available? If the year of purchase is available, even if year of purchase is not available, at least in the market, valuers are available. They can say how this must be 10 years old, 5 years old. They can give you a rough idea. If year of purchase is available, very good knowledge or guaranteed of a come out. Just see. An organization determines the water tank was installed at a cost of 150. Let's do the calculation. 150. And it started operation on the 13th, 13th April to the 6th. Historical cost, very easy. For two years' appreciation, this we have been doing it. We do this, the cost came to us, and the valuation came to us. But now what? A building, you have been transferred to one institution where there is one building, which you know was purchased in 1996, 1997. But, you do not have, you do not have any record of today. Today. You can find out the cost. Just see. If I am saying, this is 13, 14, and in 13, 14, I was transferred to one institution at CMIR IIT. And there was one building. When I went to the balance sheet, there was, this building was not shown in the balance sheet. I inquired. They said, sir, sorry, we do not have the purchase bill. We do not know the, in which year it was purchased. I said, at least you can find out the year of purchase as the valuer. Valuer said, yes, sir. It was purchased somewhere in, let's say, 1999-2000. I said, very good. Can you give me the current market price ? He went to the market from the property dealer real estate. He said, its market value today is, let's say, 120. But, it was constructed in which year. We all know this much of stats. Deflation index, inflation index. It has been given in your guidance document. You can use it. You will find out where the assets are with you, but you are not showing in your balance sheet because you do not have any bill. You do not know any other things. Go backwards. And how to go backwards is very easy. How many of you have seen these rates? Income index and index. These indexes are given in 13, 14. What's the, what's the value? 19-39. And in 2009-2000, it was what? 389. It means, can I find the value here 120 into 389 divided by This approach is going on a lot, sir. It seems very easy, sir. This is a very useless approach. In those assets, especially those ULBs, those government level, where there are so many assets, we only look at the our organization. But there are a lot of organizations where you go. If I calculate this approximate value, let's suppose 40,000. This is how many years? 14 years. If let's suppose depreciation rate on building is 10% I'm assuming it 10%. 10% SLM and in 10 years, gone. It means it should not be shown in the balance sheet. Zero. But if the value is let's say depreciation rate is 5%. SLM 40,005%. How much amount? 40,005%. 2000. So 2000 will be charged for 14 years. What's the value? So in my balance sheet, I can show it at and this is approved by the central government method. This method is used when you do not have any information. Still you can find out using the current approach. Sir, even if it is not known, then at least you ask any engineer, any guy, who will tell you the estimate life. I know, please understand even AS6 talks about this. AS6 never says the actual life. It says estimate life. Life is never the actual. Never the actual. No one can find out actual life. It's always estimated. No auditor can question this. I know, Abhishek most of you must be thinking using this approach. When you face any asset, in those cases you can immediately find out especially here in Uttarakhand, let's say there must be a lot of assets which have no whereabouts. Now you tell me if you actually want to find out the valuation. In Taj Hotel, when that incident happened all accounting records were destroyed. In those cases this matter is useful. Only one point, sir. Please, sir. Now earlier it was not, the value was not there in the balance sheet. Now as per the calculation I am taking 12,000 in the balance sheet as per your example. Now what is the corresponding entry? Capital fund, sir. Okay, okay. Thank you, sir. Capital fund. Because the entry immediately becomes fixed as I go on debit to capital fund. Can break for lunch?