Property_Manu - Final - The New India Assurance Co. Ltd.

The New India Assurance Co.Ltd.PROPERTY CELL/HO/RB/03/CIR/57320 th October 2003.ALL RO’SKind Attn.: Asst. Gen. Mgr./ Regional managerRe : Accounting Standards (AS)-5Implication on delayed renewal of lease agreements.Your urgent & serious attention is invited to the (AS) 5 provisions (copy enclosed) under AccountingStandard as prescribed by the council of the Institute of Chartered Accountants of India. We wishto particularly refer to the ‘Prior Period items’ Clause when due provisions are to be made by theCompany for expenses which arise in the current period as a result of errors or omission in thepreparation of the financial statements of one or more prior periods.We have been time & again reminding RO’s (please refer our recent circulars dtd. 03.03.03 &29.05.03) to pay proper attention to renewal of lease agreements of our office premises but regretto find that the RO’s are still not complying with our advices & we continue to receive proposalsfor renewal of lease involving arrears of rent in respect of periods which have lapsed after expiryof lease. Some of these cases involved renewal terms already agreed which can simply beenforced without even obtaining HO approval provided the notice conveying our intention torenew the lease has been served well in time & proper follow-up is done by the Company. Evenwhere the lease terms are on ‘mutually agreed terms’ a Negotiation Committee can be constitutedafter serving notice & the outcome be sent along with prescribed format to HO for approval.Please note that our Company has already invited serious flak from the Statutory Auditors onthis issue & the Management has asked the Department to not to recommend any proposalwhich invites (AS)-5 provisions. Further in view of the repeated lapses they have advised to fixresponsibility for the delay.The Regional In charge is therefore advised to please immediately convene a meeting withRegional Accountant & Property & estate Dept. officials to ensure that adequate provisions areworked out where the Company is expected to incur arrears of increased lease rents which mayrelate to prior periods. Such figures should be shown as ‘contingent prior-period liability’ to bereflected in notes forming part of the accounts without actual provision. This practice is to beimplemented immediately so that the prospective accounts for 2003-2004 are adequatelyprotected from adverse comments under ‘AS-5’ provisions.MANUAL ON PROPERTY71