UTI accounting policy changes benefit US64

Calcutta, March 29: The Unit Trust of India (UTI) has made significant changes in its accounting policy in 1996-97 (July-June) which have had different impact on various schemes managed by the trust. US 64 happens to be the single largest beneficiary with accretions of over Rs 98 crore to reserves. In a departure from the earlier practice of charging depreciation on fixed assets for the full year irrespective of the date of capitalisation, the trust has changed the method of providing depreciation for assets held for less than six months during the year.

In such cases, depreciation is provided at half of the stipulated rates on the written down method for assets held for less than six months in the accounting year. The stipulated rates are five per cent for building and premises; 10 per cent for furniture and fixtures and 33.33 per cent on office equipment, building improvements, computers and motor vehicles.

Besides, depreciation in the fixed assets held under the US 64 scheme was computed and allocatedto all schemes of the trust till the previous year.In 1996-97, the entire depreciation has been charged in the books of US 64 and lease rent of 15 per cent per annum on the capitalised gross block is recovered from all other schemes for use of fixed assets. The net impact of the revised depreciation scheme for US 64 is not material. Lease rent recovered by US 64 in 1996-97 is Rs 23.78 crore.

Another important change made in 1996-97 pertains to provisioning for NPAs. Till 1995-96, the trust had been classifying investments in debentures, bonds, transferable notes, term loans and deposits as NPAs if interest was due for previous two quarters or more. In 1996-97, these investments have been classified as NPAs consequent upon default in payment of principal instalments.