Free reserves
This query is : Resolved
Chandresh Bardia
(Querist)
21 December 2014
what is free reserve in accordance with sec 186 of companies act and same also in divided declaration out of reserve and is capital reserve is part of free reserve.
thanks in advance
CS Mitesh Mehta
(Expert)
22 December 2014
Section 2(47) defines “free reserves” as such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:
Provided that— (i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or (ii) any change in carrying amount of an asset or of a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserves;
Capital reserve is not the part of free reserve
Provided that— (i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or (ii) any change in carrying amount of an asset or of a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserves;
Capital reserve is not the part of free reserve
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