Hi,
Net worth shall have the same meaning as defined under section 2(57) of the Companies Act, 2013.
Net worth = (Total paid-up share capital + reserves out of profit + securities premium account) – (accumulated losses + expenditure + miscellaneous expenditures which are written off).
Net worth shall be calculated from the first audited financial statement
Txs
Hi Yasaswi,
You are right! As per Section 2(57) of the Companies Act, 2013, the formula for Net Worth is:
Net Worth = (Paid-up Share Capital + Reserves created out of profits + Securities Premium Account) – (Accumulated Losses + Deferred Expenditure + Miscellaneous Expenditure written off)
Ind AS doesn’t define “Net Worth” explicitly, but in practice, Net Worth is considered the same as Equity Shareholders’ Funds.
Equity as per Ind AS includes:
Share capital,
Other equity (which includes reserves and surplus),
Less accumulated losses or deficit.
So, under Ind AS:
Net Worth ≈ Total Equity = Share Capital + Reserves & Surplus – Accumulated Losses
The key point is to exclude any items not considered equity or those that are amortized/write-offs as per accounting standards.
CAclubindia
