Fixed Deposits & Ind AS: Fair Value Explained

This query is : Resolved

Quick Summary

This discussion clarifies that fixed deposits with banks do not typically require fair valuation under Ind AS, remaining at their invested amount. This is because they are considered simple investments with fixed interest, unlike refundable lease deposits which are fair valued due to the uncertainty of their return, as they function as security against potential damages.

Faheemuddin Mohammad

Faheemuddin Mohammad (Querist)
Follow

17 May 2023 Do we have to fair value the fixed deposits with banks as per Ind AS?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

17 May 2023 No. It remains same as amount invested.

Faheemuddin Mohammad

Faheemuddin Mohammad (Querist)
Follow

18 May 2023 Why don't we fair value as per amortized cost method? (As the fixed deposit is a financial asset satisfying amortized cost method business model)

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

18 May 2023 As its just investment, having fixed rate of interest, which gets capitalized on quarterly basis. Other than that, it does not have any market value.

Message likes : 1 times

Faheemuddin Mohammad

Faheemuddin Mohammad (Querist)
Follow

18 May 2023 Thank you for your reply Sir!
But my doubt is,
Then why do refundable lease (rent) deposits are fair valued?
Aren't lease deposits and fixed deposits having same characteristics as you mentioned above?

Message likes : 1 times

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

18 May 2023 A security deposit is a set amount of money paid at the start of renting a place. This sum of money is held by the landlord throughout the rental agreement or lease. It pays for any damage the tenant caused in the unit until the end of the lease period. So, thee is no guarantee of the same amount being returned.

Faheemuddin Mohammad

Faheemuddin Mohammad (Querist)
Follow

19 May 2023 Do that security deposit would have market value?
If not, why the security deposit is fair valued?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

19 May 2023 Do you find any option to transfer or trade the security deposit?

Faheemuddin Mohammad

Faheemuddin Mohammad (Querist)
Follow

19 May 2023 No Sir! There is no option to trade security deposit.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now