10-02-2009, 08:40 PM
Dears,
I wish to re-quote the Rule;
QUOTE
A company may issue shares for consideration otherwise than in cash subject to the following conditions, namely;--
(i) The value of assets shall be determined by a consulting engineer registered with Pakistan Engineering Council and borne on the panel of at least two financial institutions as a Valuer;
(ii) the value of assets taken over shall be reduced by depreciation charged on consistent basis;
(iii) the goodwill and other intangible assets shall be excluded from the consideration; and
(iv) certificate from a practicing Chartered Accountant shall be obtained to the effect that the above mentioned conditions have been complied with.
UNQUOTE
From (iv) it is clear that CA is required to certify whether valuation is done by approved consulting engineer (CA is nothing to do how he has determined because SECP has given the authority to the valuer to determine the value of assets) along with (ii) and (iii).
However, during audit we have to follow the auditing standard and have to dig out all the situation.
For depreciation I am still of the same point of view stated earlier,
I wish that members should clear the situation. I am giving one example;
At the date of valuation following information are available for asset;
Cost of acquisition 100 M
Acc. Depreciation to date (2 years) 40 M
Useful Life 5 years
Revalued amount 70 M
I think shares will be issued against 70 M if shares are issued at valuation date and if shares are issued after 6 months of the valuation then depreciation of six months (say 5M) shall be deducted from 70 M and shares will be issued against 65M. (am I right?)
Now come to the interpretion of certification and audit. There are two words used in law that are âto be auditedâ and âto be certifiedâ (audit and certify).
I understand that both words have not same scope and meaning otherwise one word (audit or certify) should have been used in law.
I think certification has limited scope than audit.
As for as misstatement by the valuer is concerned, the reason behind the requirement that the valuer must be approved / registered with PEC is to mitigate such risk of misstatement / inaccuracy and to establish quality standards by PEC.
Anyway, good to have discussion on the topic.
Regards,
*
I wish to re-quote the Rule;
QUOTE
A company may issue shares for consideration otherwise than in cash subject to the following conditions, namely;--
(i) The value of assets shall be determined by a consulting engineer registered with Pakistan Engineering Council and borne on the panel of at least two financial institutions as a Valuer;
(ii) the value of assets taken over shall be reduced by depreciation charged on consistent basis;
(iii) the goodwill and other intangible assets shall be excluded from the consideration; and
(iv) certificate from a practicing Chartered Accountant shall be obtained to the effect that the above mentioned conditions have been complied with.
UNQUOTE
From (iv) it is clear that CA is required to certify whether valuation is done by approved consulting engineer (CA is nothing to do how he has determined because SECP has given the authority to the valuer to determine the value of assets) along with (ii) and (iii).
However, during audit we have to follow the auditing standard and have to dig out all the situation.
For depreciation I am still of the same point of view stated earlier,
I wish that members should clear the situation. I am giving one example;
At the date of valuation following information are available for asset;
Cost of acquisition 100 M
Acc. Depreciation to date (2 years) 40 M
Useful Life 5 years
Revalued amount 70 M
I think shares will be issued against 70 M if shares are issued at valuation date and if shares are issued after 6 months of the valuation then depreciation of six months (say 5M) shall be deducted from 70 M and shares will be issued against 65M. (am I right?)
Now come to the interpretion of certification and audit. There are two words used in law that are âto be auditedâ and âto be certifiedâ (audit and certify).
I understand that both words have not same scope and meaning otherwise one word (audit or certify) should have been used in law.
I think certification has limited scope than audit.
As for as misstatement by the valuer is concerned, the reason behind the requirement that the valuer must be approved / registered with PEC is to mitigate such risk of misstatement / inaccuracy and to establish quality standards by PEC.
Anyway, good to have discussion on the topic.
Regards,
*
