Profit/ Loss on Revaluation of Fixed Assets
The auditor should satisfy himself about the appropriateness and proper application of the basis of revaluation of fixed assets adopted by the bank. Where revaluation is based on an appraisal/report/certificate by approved valuers, the auditor should examine the appraisals to the extent possible and satisfy him about their adequacy for audit purposes.
The revaluation of fixed assets can be done on the basis of appraisals by competent valuers such as engineers or architects, or on the basis of indexation of historical cost, or with reference to current prices. The auditor should satisfy himself about the appropriateness and proper application of the basis of valuation adopted by the bank. Where revaluation is based on an appraisal by valuers, the auditor should examine the appraisals to the extent possible and satisfy himself about their adequacy for audit purposes.
The auditor should also examine that the bank has complied with the provisions of AS 28, Impairment of Assets. In terms of paragraph 58 of AS 28, an impairment loss should be immediately recognised as an expense in the Profit and Loss Account, unless the asset is carried at revalued amount in accordance with AS 10. In such a case, any impairment loss of a revalued asset should be treated as a revaluation decrease under AS 10.
The Notes and Instructions for compilation of profit and loss account, issued by the Reserve Bank, require that in case any item under this head exceeds one per cent of the total income, particulars thereof may be given in the notes.