Alterations in the Schedule XIV of the Companies Act, 1956

Posted: 25/04/2012 in Company, MCA, Notifications, Schedule XIV

Notification- [F. No. 17/292/2011 CL-V], dated 17th April, 2012

G.S.R.  (E) :- In exercise of the powers conferred by sub-section (1) of section 641 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following further alterations in the Schedule XIV of the said Act, namely:-

In Schedule XIV to the Companies Act, 1956, after serial number IV relating to Ships and the entries relating thereto, the following serial number and entries shall be inserted, namely:-

“V- Intangible Assets

1. Intangible Assets (Toll Road) created under Build, Operate and Transfer, Build, Own, Operate and Transfer or any other form of Public Private Partnership Route.

Amortization Rate     =

Amortization Amount × 100
Cost of Intangible Asset (A)

 Amortization Amount =

Cost of Intangible Asset (A) ×

Actual Revenue for the year (B)
Projected Revenue from Intangible Asset

(till the end of the concession period) (C)

 2. Meaning of particulars are as follows:-

Cost of Intangible Asset (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 Intangible Asset as provided to the Project Lender at the time of financial closure/agreement.

 

The amortization amount or rate should ensure that the whole of the cost of the intangible asset is amortized over the concession period.

Total Revenue shall be reviewed at the end of each financial year and the projected revenue shall be adjusted to reflect any changes in the estimate which will lead to the actual collection at the end of the concession period.

3. For Example:-

Cost of creation of Intangible Assets  Rs. 500/- Crores
Total period of Agreement  20 Years
Time use for creation of Intangible Assets  02 Years
Intangible Assets to be amortized in  18 Years

Let us assume 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 amortization rate for the first year.”

Renuka Kumar

Joint Secretary to the Government of India

Note: The Schedule XIV to the Companies Act, 1956 was subsequently amended by the following notifications, namely:-

(i) G.S.R.416(E), dated the 14th May, 1993;

(ii) G.S.R.416(E), dated the 16th December, 1993;

(iii) G.S.R.416(E), dated the 4th November, 1994;

(iv) G.S.R.416(E), dated the 1st March, 1995;

(v) G.S.R.416(E), dated the 18th August, 1998;

(vi) G.S.R.416(E), dated the 14th December, 2011.

Click here to download the complete text of the above Notification in PDF Format- G.S.R. (E). dated 17.04.2012- Alterations in the Schedule XIV of the Companies Act, 1956.

Source: Ministry of Corporate Affairs.

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