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Revalation of Investment

10 May 2007

We have two companies One has made Investment In other suppose A & B . A Has Made Investment in B now B company is in profits but A company have much Losses I want to revalue the shares which are held by A in B Actually this I want to wipeoff the losses in A co. side by side want to save tax could it be possible. Moreover Inventory of A includes some Fixed Assets if it Transferred from inventory to fixed assets could it be change the shape of the balance sheet.

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7 Replies

Friend (124 Points)
Replied 10 May 2007

Wierd Question I am not getting the concept at all...
Company is a seperate legal entity.
Company B is in Profit
Company A is making loss
A has invested in shares of B
And now A wants to revalue shares?
Fixed Assets include Inventory
very vague really vague
Is that your Q or u picked it from somewhere??

Kapoorsmriti (27 Points)
Replied 10 May 2007

sorry I have not write down the both companies are sister concern loss making (A) has made investment in its sister concern (B) which is profit making when I calculate the net worth of the comapny (B) ITS FAIR VALUE OF SHARES IS GOOD then I have revised the value of Investment in the Company A this only I have doing to wipe off large profits in Company A also not to Increase the taxabl profits of the company I literlly want to way out I U have any other option regarding my querry then please mail instantly

Kapoorsmriti (27 Points)
Replied 10 May 2007

[quote=Guest user (Guest)]sorry I have not write down the both companies are sister concern loss making (A) has made investment in its sister concern (B) which is profit making when I calculate the net worth of the comapny (B) ITS FAIR VALUE OF SHARES IS GOOD then I have revised the value of Investment in the Company A this only I have doing to wipe off large profits in Company A also not to Increase the taxabl profits of the company I literlly want to way out I U have any other option regarding my querry then please mail instantly Also Company has purchased some fixed assets in last previous year but wrongly it has been included in inventories is there any solution that we can rectify this mistake also [/quote]

Ankit Bhatia (163 Points)
Replied 10 May 2007

See this is a long term invesst and you have to value it as per AS 13 -ie at cost and i dont think you can revalue it upwards.
Secondly this will be a notional valn and hence without any tax consequences and tax consequences will be there only on actual sale and actual profit.
If you revalue ,then deferred tax consequences will be there as per AS 22.

Sc (205 Points)
Replied 10 May 2007

Normally, long-term investments such as these, are stated at acquisition cost only. revaluation can be made only if the change in value is long term. even if u do revalue it upwards....u will have to create a revaluation reserve, which, as far as i know, cannot be set off against debit balance in the P/L account.

sandhya13sharma (16 Points)
Replied 10 May 2007

Thanks SC

Ankit Bhatia (163 Points)
Replied 10 May 2007

this is a long term invesst and you have to value it as per AS 13 -ie at cost and i dont think you can revalue it upwards.
Secondly this will be a notional valn and hence without any tax consequences and tax consequences will be there only on actual sale and actual profit.
If you revalue ,then deferred tax consequences will be there as per AS 22.