Query on audit treatment
This query is : Resolved
01 July 2009
The facts are as under:
1. I am the auditor of X Pvt. Ltd., who has pledged certain investments (shares in listed company) owned by it, to secure the debt take by its sister concern A Limited.
2. A Limited defaulted, consequently the lender of A Ltd. sold off the investments belonging to X Private Limited to recover its part debit.
The Query is:
1. What treatment should X Pvt. Ltd. give in its books and why? that is should is show as Sale of Investment or continue to show investment.
2. At what price should X Pvt. Ltd. show sale of investment (it also do not have the details as to the price at which the lender of A Limited has sold the investments)
Thank You
1. I am the auditor of X Pvt. Ltd., who has pledged certain investments (shares in listed company) owned by it, to secure the debt take by its sister concern A Limited.
2. A Limited defaulted, consequently the lender of A Ltd. sold off the investments belonging to X Private Limited to recover its part debit.
The Query is:
1. What treatment should X Pvt. Ltd. give in its books and why? that is should is show as Sale of Investment or continue to show investment.
2. At what price should X Pvt. Ltd. show sale of investment (it also do not have the details as to the price at which the lender of A Limited has sold the investments)
Thank You
24 July 2009
First of all, as an auditor, u should have shown this thing in contingent liability in the previous years.
In the current year, the investment shud be shown as sold at the amount which is recovered from the lender of A Limited (after deducting his dues to ur sister concern)
Accordingly profit/loss on sale of asset shud be calculated. U can always refer a note in Notes to accounts of the financials highlighting such treatment so that the reader do not get confused about the loss incured by the Company
In the current year, the investment shud be shown as sold at the amount which is recovered from the lender of A Limited (after deducting his dues to ur sister concern)
Accordingly profit/loss on sale of asset shud be calculated. U can always refer a note in Notes to accounts of the financials highlighting such treatment so that the reader do not get confused about the loss incured by the Company
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