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  • Project deposits

    by rahul on Tuesday, July 12, 2016 at 11:15 AM

    If entity have given rental deposit when property in which premises rented is under construction. But subsequently construction not completed and deposit are still lying as is. In this case how deposit should be valued as there is no fixed date upto which deposits will be refunded? How to derive Faire value as there is no fixed date on which deposit will be refunded?

    Replied byEditorial Board Wednesday, July 20, 2016 at 11:01 AM

    Presumption: Rental deposit is refundable in cash.
    As per Ind AS 32, Financial Instruments: Presentation, a financial asset is any asset that is:
    (a) Cash;
    (b) an equity instrument of another party;
    (c) a contractual right:
    (i) to receive cash or another financial asset from another entity; or
    (ii) to exchange financial……entity; or
    (d) a contract….and is:
    (i) a non-derivative…instruments; or
    (ii) a derivative….instruments.

    Referring to the definition of financial asset, rental deposit should be treated as financial asset. As per Ind AS 109, all financial assets should be measured initially at fair value
    Further, in your case, as the construction is not completed the rental deposit has become in the nature of receivable on demand. So, fair value of rental deposit should be the amount that will be received on demand.

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