The Reserve Bank of India, (RBI) on February 20, 2023, issued a Circular regarding the implementation of Indian Accounting Standards (Ind AS)
This has a reference to the circular DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020, on the captioned subject read with paragraph 13 (iii) of Master Circular DOR.SIG.FIN.REC 1/26.03.001/2022-23 dated April 1, 2022, on Asset Reconstruction Companies.
This circular is applicable to all ARCs preparing their financial statements as per Ind AS
The following have been stated namely: -
• it has stated that the ARCs shall prepare their financial statements as per Ind AS, and shall reduce the following amounts from their net owned funds while calculating the Capital Adequacy Ratio and the amount available for payment of dividends namely: -
a) Management fee recognized during the planning period that remains unrealized beyond 180 days from the date of expiry of the planning period.
b) Management fee recognized after the expiry of the planning period that remains unrealized beyond 180 days of such recognition.
c) Any unrealized management fees, notwithstanding the period for which it has remained unrealized, where the net asset value of the Security Receipts has fallen below 50 percent of the face value.
• It stated that the amount reduced from net owned funds and the amount available for payment of dividend should be net of any specific expected credit loss allowances held on unrealized management fee referred to in sub-paragraphs (a), (b) and (c) and the tax implications thereon if any.
• The Audit Committee of the Board shall review the extent of the unrealized management fee and satisfy itself on the recoverability of the same while finalizing the financial statements.
• Further It shall ensure that the management fee is computed strictly in accordance with extant regulations.
• The ARCs shall disclose information on the aging of the unrealized management fee recognized in their books in the format as part of the Notes to Accounts in the annual financial statements
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[Circular No. 104/21.07.001/2022-23]
