Valuation of assets

Dear Friends,
I was visiting one of our partners in Odisha. The NGO told me that they are unable to get the Government projects since the Government is seeking a minimum fixed assets of Rs. 500000/- with the NGO.
The case goes like this:
1. The NGO has purchased 18.17 acres of land in 1986 for a sum of Rs. 33273/-
2. The market value of the land as on date is in excess of Rs. 50,00,000/-
Is it possible for them to revalue and reflect the value of land in the books or do they have to follow the principle of “cost or market price whichever is lower”
Thanks and regards,

B V Soma Sastry

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5 Responses to Valuation of assets

  1. Hello,

    I believe that the NGO should carefully look at the govt. regulation to ascertain whether they actually require the fair value of fixed assets to be reflected in the accounts of NGO.

    If No, then just a valuation report from an approved valuer should be appended with the documents to qualify the min. criteria while applying for govt. project.

    If Yes, then I agree with Mr. Sharath Trehan’s answer above.

  2. Sharat Trehan says:

    Subject to the provisions of the Accounting Standard on Fixed Assets, and the Guidance Note on Revaluation of Fixed Assets issued by ICAI, you may have the land professionally valued through a recognised valuer, and bring the current value as per the valuation report into your books, crediting the difference to “Revaluation Reserve”. However, please do take adequate professional advice on the income tax implications regarding utilisation etc.

    Sharat Trehan

  3. shekar says:

    In the books of account Land is always shown at cost. However you can append a note on the financial statement that the present market vale of the land is Rs 50,00,000.

  4. Brij Mohan Dixit says:

    Dear Sastry

    As per my knowledge the DLC rate is considered for the valuation of land


    B. M. Dixit

  5. gopalakrishnan says:

    Dear Mr Soma sastry,
    You may request an approved valuer preferably who is the Bank/income tax panel
    to value the asset. In the books you may show the present value(based on the value given by the valuer) on the asset side and the difference between actual cost and the market price as “capital reserve/General reserve with appropriate notes in the Annual accounts.

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