RBI
Announce Uniform Accounting Standards At Asset Reconstruction Companies
The Reserve Bank of
India (RBI) on 23 April 2014 issued uniform accounting standards at Asset
Reconstruction Companies (ARCs).
Revenue
Recognition-
(i) Yield should be
recognised only after the full redemption of the entire principal amount of
Security Receipts.
(ii) Upside income
should be recognized only after full redemption of Security Receipts.
(iii) Management fees
may be recognized on accrual basis. Management fees recognized during the
planning period must be realized within 180 days from the date of expiry of the
planning period. Management fees recognized after the planning period should be
realized within 180 days from the date of recognition. Unrealised Management
fees should be reversed thereafter. Further any unrealized Management fees will
be reversed if before the prescribed time for realisation, NAV of the SRs fall
below 50% of face value.
Valuation
of Security Receipts (SRs):-
Considering nature of
investment in SRs where underlying cash flows are dependent on realization from
non performing assets, it can be classified as available for sale. Hence
investments in SRs may be aggregated for the purpose of arriving at net
depreciation/ appreciation of investments under the category. Net depreciation,
if any shall be provided for. Net Appreciation, if any should be ignored. Net
depreciation required to be provided for should not be reduced on account of
net appreciation.
