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Forensic Accounting

Investment in kind by Shareholder


Hi all

We have a situation, where the shareholder of the company has injected further investment in the company by giving away a piece of land to the company.

My questions are:
1. Is there any specific standard (IAS/IFRS) or IFRIC?SIC that deals with this transaction.
2. How the value of the asset should be determined. (I believe it should be fair value, however, i need a reference from accounting standards for this specific treatment.)

asked Mar 23 in General IFRS Discussion by Mian Musawar Level 3 Member (7,160 points)

1 Answer

0 votes
When a shareholder gives away piece of land to company as share subscription, it can be treated as sale for tax purpose and not investment.
A shareholder can not transfer asset at lower than market value hence, value should be determined  by professional appraiser.
Where the transferred asset is land, it could be subject to specific business tax upon registration at Land department as well.
Ind AS 102 share based payment states treatment for such type of transaction but it does not specifically guides regarding transfer of Land by shareholder. No standard particularly refers such types of transactions, however there are few court decisions supporting above treatment.
answered Mar 23 by Shivangi Level 4 Member (7,570 points)
Thank you for your answer. I have further following queries.

Tax is not an issue. My question was how to treat it for accounting purposes.
I believe share based payments is entirely a separate topic.
You second para says "A shareholder can not transfer asset at lower than market value hence, value should be determined  by professional appraiser". is there any reference for this is accounting standards?
I already mentioned there is no standard guides for treatment of such type of transaction. The treatment here would be based on judgement only and what I have mentioned in second para is treatment suggested in some court decisions for similar transaction.
It may not be tax issue for the company but when there is no specific treatment is given in any standard. Such transactions are treated according to past experience and  court judgement.



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