Financial Reporting

Accounting for the Investments made by the Mutual Fund is not done on Daily Basis like in the case of 'Derivatives and options" But these are Marked to Market on Yearly Valuation at the End of the Fin. Year.....

Following enteries are passed at the year end

1)in case of appreciation in the Value of the investments

Investments A/C -------dr.       (increment)

   To Unrealised appreciation A/c                   (increment)

(Note-This entry shall be reversed in the begining of the Next yr.)

In Balance sheet the Investments shall be remained at cost price

2)In case of loss in the value of the investments

Revenue A/C----------dr. (Decrement)

    To Prov. for Depreciation                   (Decrement)

(Note- this entry shall not be Reversed in the Next yr since here Prudence concept shall become applicable)

Manish Arya

Manish Arya Bhai,

 This entry has been given in our stydy mat but as per AS 30 the entry would be:

1)in case of appreciation in the Value of the investments

Investments A/C -------dr.       (increment)

   To Revenue  A/c                   (increment)

2)In case of loss in the value of the investments

Revenue A/C----------dr. (Decrement)

    To Investment A/c                   (Decrement)

3) Incase of sale of the investment

Bank A/c........................ Dr.       (Sale value)

Revenue A/c................................Dr.         (Loss if any )

    To Invetment A/c      (Cost of investment)

   To Revenue A/c         ( Profit if any )

Now Please anyone confirm which would be followed............???

Here, I am uploading the Revised solutions of illustrations of Mutual funds

Friend  !

I have been taught by Parveen Sharma Sir..... What i had written above is just a replica of what he taught me and the Whole students community in our Batch.....Tell me Have u consider the "Guidence Notes on Accounting for Mutual Funds" ,, if you have then ur answer  is not correct since with the adoption of A.S 30,31, & 32, guidence notes has been withdrawn......So just check at ur End and reply me.....

Manish

I just checked ur attached file... I'm too confused ,,From where did u got this .... reliable source?...... Whether it's there on Institute's website....

I'm leaving u my number just sms me coz i'll not be available on internet much ...+919417020345

Originally posted by : Manish Arya
	I just checked ur attached file... I'm too confused ,,From where did u got this .... reliable source?...... Whether it's there on Institute's website....

See Para 8.2 (b) (ii) of AS 30 and read with A19 and A20 (a) of Appendix A of AS 30 [given in the Volume II of Financial Reporting ]

then read atteched file....

CA_Final__Mutual_Funds_as_per_AS-30  .pdf

In my opinion, there are different ways to recognise income/loss as per 30  namely FVTPL, AFS, HFT, L&A

now it depends upon the entity the method which it prefers to adopt while drafting it financials and in that case the method for treating profit/ loss on mark to market would differ.

even the said AS also states the penalty or say hindrance if you want to chage the method adopted to the new method

@ C.A Mihir Shah.......Sir, plz undergo the Enteries which i(Manish Arya) had written on the Post and tell us,Isn't that as per A.S 30,31&32......

Thanks in Advance !

Manish

@ Manish - what u said is correct, i am not denyin that. what u have quoted above is one of the mothod's suggested in AS..

Now i think i got it...! I was just saying the same thing to @ suresh prasad.....It's just the method u are applying,since various methods has been given by A.S 30,31&32 to value various financial Assets/Liablities...So for mutual funds We have a particular Set of Entries to record different transactions of mutual funds which has been posted above by me......

@ C.A Mihir Shah... Sir i need u to confirm this... am i saying Right ?

Originally posted by : CA Mihir Shah
	In my opinion, there are different ways to recognise income/loss as per 30  namely FVTPL, AFS, HFT, L&A now it depends upon the entity the method which it prefers to adopt while drafting it financials and in that case the method for treating profit/ loss on mark to market would differ. even the said AS also states the penalty or say hindrance if you want to chage the method adopted to the new method

But with the adoption of A.S 30,31, & 32, guidence notes has been withdrawn....

And the entries provided by Manish Bro is as per "Guidance Note"

Ist' it.................????????????

Please clarify Members...!!!!!!!

@ Suresh.....No my friend...... It's as per A.S 30,31 & 32,,,, I don't know from where u have downloaded the file which u had attached ,I'll go with what i have written(Being taught by Parveen sharma sir)

Originally posted by : Manish Arya
	@ Suresh.....No my friend...... It's as per A.S 30,31 & 32,,,, I don't know from where u have downloaded the file which u had attached ,I'll go with what i have written(Being taught by Parveen sharma sir)

But In Study MAt PAGE NO 8.12 of VOL-II of Financial Reporting ............

1.9 MARKING INVESTMENTS TO MARKET
For the purposes of the financial statements, mutual funds shall mark all investments to
market and carry investments in the balance sheet at market value. However, since the
unrealized gain arising out of appreciation on investments cannot be distributed, provision has
to be made for exclusion of this item when arriving at distributable income.
Clause 2(i) of Eleventh Schedule of the regulations provides that in carrying investments at
market values, the asset management companies should follow the Guidance Note issued by
the Institute of Chartered Accountants of India.
As per paragraph 10 of the Guidance Note on Accounting for Investments in the Financial
Statements of Mutual Funds, issued by the Institute of Chartered Accountants of India, while
marking investments to market on balance sheet date, the excess of cost of acquisition over
market value of securities on valuation day is treated as depreciation (unrealized loss).
Likewise, the excess of market value of securities on valuation day over cost of acquisition is
treated as appreciation, which is unrealized gain.
The provision for depreciation in the value of investments is created in the books by debiting
the Revenue Account. The provision so created is shown as a deduction from the value of
investments in the balance sheet. However, unrealised appreciations are directly transferred
to the Unrealised Appreciation Reserve, (i.e., without routing it through the Revenue Account)
with the corresponding debit to the Investments Account. The Guidance Note recommends
reversal of the Unrealised Appreciation Reserve at the beginning of the next accounting year.

@ suresh  do tou mean to say that asset management company needs to follow guidance note on mutual funds??

You are right @ Mihir.....coz the enteries suggesed by @ Suresh is as per the Guidence Notes.... the reference which has been quoted by @ suresh is Study material which "WE KNOW How Often it is Updated"....So @ suresh ... choice is urs.