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Calculation of managerial remuneration

yogesh (no) (101 Points)

06 February 2016

Can anyone tell me the procedure to be followed for calculating Managerial remuneration. Thanx in advance

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manisha (cs) (1118 Points)
Replied 06 February 2016

How to Calculate Net Profit for Managerial Remuneration As per companies act the net profit we arrive at in financial statements say statement of financial performance (P&L statement) should not be used for calculating the remuneration payable to directors. Now the companies act 2013 made it mandatory to consider the net profit calculated u/s 198 of the act for CSR also. Here I�m going to discuss some lines about Calculation of net profit for managerial remuneration. Profit before tax as per P&L Statement xxxxxxx Add the following items if debited to P&L Statement before arriving profit before tax xxxx Managerial remuneration xxxx Provision forBad doubtful debts xxxx Loss on sale/disposal/discarding of assets. xxxx Loss on sale of investments xxxx Provision for diminution in the value of investments xxxx fixed assets written off xxxx Fall in the value of foreign currency monetary assets xxxx Loss on cancellation of foreign exchange contracts xxxx Write off of investments Provision for contingencies and unascertained liabilities xxxx Lease premium written off xxxx Provision for warranty spares/supplies xxxx Infructuous project expenses written off xxxx Provision for anticipated loss in case of contracts xxxx Loss on sale of undertaking xxxx Provision for wealth tax xxxx compensation paid under VRS xxxx Less the following if credited to P&L statement for arriving at profit before tax: xxxx Capital profit on sale/disposal of fixed assets(the same should be added if the co., business comprimises of buying & selling any such property or asset) and revenue profit (difference between original cost and WDV should not be deducted) xxxx Profit on sale of any undertaking or its part xxxx Profit on buy back of shares xxxx Profit/discount on redemption of shares or debentures xxxx Profit on sale of investments xxxx Compensation received on non-compete agreements xxxx Write back of provision for doubtful debts xxxx Write back of provision for doubtful advances xxxx Appreciation in value of any investments xxxx Compensation received on surrender of tenancy rights xxxx Profit on sale of undertaking xxxx Write back of provision for diminution in the value of investments xxxx Profit on sale of forfeited shares & shares of subsidiary/associated companies xxxx After calculating the profit as said above the limits specified in the act in respect of managerial remuneration can be applied to know the maximum allowable remuneration. If the actual remuneration is more than maximum allowable remuneration then we can the permission of Central Government should be obtained