Dear Members,
In a Society registered in Lucknow under the Societies Registration Act 1860 some assets have been purchased in projects under FCRA . On completion of the project the society has been allowed to retain these assets by donors. What would be the treatment of these assets in the books of Society and how is it to be presented in the balance sheet of the Society as a whole.
With Thanks & Regards
CA Rajeev Sharma
B.Com. F.C.A.D.I.S.A.(ICA)
Rajeev Siddharth & Associates
Chartered Accountants
308 Sahara Shopping Centre
Faizabad Road
Lucknow 226 016
The Asset would always maintain its foreign character till the end of its utility, wherein it will be written off and even the proceeds received from scrap sale should be FC funds would be my take.
Thank you Rajiv ji, for a wonderful question.
Normally assets are capitalised in the books of the NGO who procures it, although the donor agreement generally do state that donor retains the right of recovery in case of non-performance or lack of performance. However this right is used only rarely. Thus assets once acquired become asset of the NGO and have to be disclosed accordingly. Let us not forget, invoice has the name of the NGO and it has been paid out of NGO’s bank account. Recently FCRA authorities have raised objections where the assets are not in the name of the NGO (say a vehicle or land). Hence my first suggestion is that the asset should be capitalised in the balance sheet as NGO’s asset, there could be a disclosure by way of a note, in case donor has retained the right to takeover the asset in case of any dispute.
Even FCRA authorities have no problem with this, as FCRA regulations generally state that identity of FCRA assets must be retained and if disposed, proceeds must be treated as FC Contribution.
Hope above clarifies what you were looking for.
warm rgds
Dear.
This is in conetx to the Assets purchased out of FC Project. I am in the opinion that Assets purchased out of FC Books are to be shown sepeartely as ” Assest purchased out of ______Donor’s Grant and and same amount to be earmarked ” as Earmarked fund for purchase of Assets out of ______Donor’s Grant. As soon as utility of the assets come to en end it would be reversed and both the accounts will be colsed.
OR
Assets purchased from the FC Project should be written of as soon as utility is over at the end of the project.