WE ARE CONDUCTING AUDIT OF STATE COOPERATIVE AGRICULTURE AND RURAL DEVELOPMENT BANK, for the purpose of raising funds the bank has to issue special development debentures to NABARD, GOVERNMENT OF INDIA AND GOVERNMENT OF RAJASTHAN.
Q 1. against these debentures, debenture redemption reserve(DRR) should be created or not?
Q 2. whether these debentures are redeemable or not?
Q 3. if they are irredeemable then DRR should be created?
please reply ASAP
You can get information on whether these debentures are redeemable or not, from management of the bank. To cross verify, please check debenture issue documents to confirm terms of issuance and repayment, i.e., whether they are redeemable or convertible or a combination of both. Do retain copies of necessary documents as working papers.
You are auditing a cooperative bank, hence provisions of Companies Act may not apply as it is. But for comparison, if debentures are redeemable, a company has to create DRR and if they are convertible, then no DRR needs to be created because the capital base of the company remains intact.
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