Alterations in the Schedule XIV of the Companies Act, 1956 in respect of Intangible Assets
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
Notification
Dated-17.04.2012
G.S.R. (E) :- In exercise of the powers conferred by sub-section (1) of section 641 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following further alterations in the Schedule XIV of the said Act, namely:-
In Schedule XIV to the Companies Act, 1956, after serial number IV relating to Ships and the entries relating thereto, the following serial number and entries shall be inserted, namely:-
“V- Intangible Assets
1. Intangible Assets (Toll Road) created under Build, Operate and Transfer, Build, Own, Operate and Transfer or any other form of Public Private Partnership Route.
| Amortization Rate |
= |
Amortization Amount x 100 |
| Cost of Intangible Asset (A) |
Amortization Amount =
| Cost of Intangible Asset (A) X | Actual Revenue for the year (B) |
| Projected Revenue from Intangible Asset (till the end of the concession period) (C) |
2. Meaning of particulars are as follows:-
| Cost of Intangible Asset (A) | = | Cost incurred by the Company in accordance with the Accounting Standards. |
| Actual Revenue for the year (B) | = | Actual Revenue (Toll Charges) received during the accounting year. |
| Projected Revenue from Intangible Asset (C) | = | Total Projected Revenue from the Intangible Asset as provided to the Project Lender at the time of financial closure/agreement. |
The amortization amount or rate should ensure that the whole of the cost of the intangible asset is amortized over the concession period.
Total Revenue shall be reviewed at the end of each financial year and the projected revenue shall be adjusted to reflect any changes in the estimate which will lead to the actual collection at the end of the concession period.
3. For Example:‑
| Cost of creation of Intangible Assets | Rs. 500/- Crores |
| Total period of Agreement | 20 Years |
| Time use for creation of Intangible Assets | 02 Years |
| Intangible Assets to be amortized in | 18 Years |
Let us assume that the Total revenue to be generated out of Intangible Assets over the Period would be Rs. 600 Crores, in the following manner:-
| Year No. |
Revenue |
Remarks |
| Year 1 | 5 |
Actual |
| Year 2 | 7.5 |
Estimate* |
| Year 3 | 10 |
Estimate* |
| Year 4 | 12.5 |
Estimate* |
| Year 5 | 17.5 |
Estimate* |
| Year 6 | 20 |
Estimate* |
| Year 7 | 23 |
Estimate* |
| Year 8 | 27 |
Estimate* |
| Year 9 | 31 |
Estimate* |
| Year 10 | 34 |
Estimate* |
| Year 11 | 38 |
Estimate* |
| Year 12 | 41 |
Estimate* |
| Year 13 | 46 |
Estimate* |
| Year 14 | 50 |
Estimate* |
| Year 15 | 53 |
Estimate* |
| Year 16 | 57 |
Estimate* |
| Year 17 | 60 |
Estimate* |
| Year 18 | 67.5 |
Estimate* |
| Total | 600 |
‘*’ will be actual at the end of financial year.
Based on this the charge for first year would be Rs. 4.16 Crore (approximately) (i.e. Rs. 5/Rs. 600 X Rs. 500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/Rs. 500 Crore X 100) is the amortization rate for the first year.”
[F. No.17/292/2011 CL-V]
Renuka Kumar
Joint Secretary to the Government of India
Note: – The Schedule XIV to the Companies Act, 1956 was subsequently amended by the following notifications, namely:—
(i) G.S.R.416(E), dated the 14th May, 1993;
(ii) G.S.R.416(E), dated the 16th December, 1993;
(iii) G.S.R.416(E), dated the 4th November, 1994;
(iv) G.S.R.416(E), dated the 1st March, 1995;
(v) G.5.R.416(E), dated the l8th August, 1998;
(vi) G.S.R.416(E), dated the 14th December, 2011.
