11/05/2013
Firms with greater degree of accounting conservatism are less innovative: Study
For big corporations, regardless of their industries, making disruptive changes isn't a question of money. Many have substantial budgets and can ride out any disruption. It's merely a question of mindset and how you position the innovative disruption on the balance sheet - but that can be the downfall.
In a research paper titled "Does Accounting Conservatism Impede Corporate Innovation?," Gilles Hilary, an associate professor of accounting and control at the international business school Insead, makes the case that firms with a greater degree of accounting conservatism are less innovative because of, among other things,
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07/05/2013
Cost accountants’ body bats for simple format for collecting cos’ data
The Institute of Cost Accountants has suggested a simple format for financial reporting for companies that will be easy to understand for the public.As per the suggestion made by the institute, companies should report aggregate revenue, cost and any resulting profit per business vertical.The ICAI is the apex body to regulate the profession of cost accountants and was set up by an Act of Parliament.The suggestion from ICAI comes in the backdrop of the chit fund scam, where the West Bengal-based Saradha Group is alleged to have duped thousands of small and medium investors.The institute said it would provide all support,
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04/03/2013
Which way IFRS?
Companies Bill contains numerous provisions aligned to International Financial Reporting Standards. Under the Bill, utilisation of securities premium will be restricted to a prescribed class of companies whose financial statement complies with specified accounting standards. In meeting IFRS requirements, such companies cannot utilise the securities premium to write off preliminary expenses of the company, write off preference share or debenture issue expenses, and provide for premium payable on redemption of preference shares/ debentures. However, if the prescribed class of companies is notified immediately, the impact will be felt straightaway in Indian GAAP financial statements. As this is not the intention, the Ministry of Corporate Affairs should notify the prescribed class at a date aligned to IFRS implementation; otherwise there may be unintended consequences.
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07/12/2012
No accounting relief for short-term forex loans, Ministry tells India Inc
The Centre has formally turned down industry’s demand for accounting relief due to fluctuation losses on short-term foreign currency loans.
Corporate India has been demanding that accounting relief granted to them in respect of long-term foreign currency loans be extended to short-term foreign currency loans also.
The law currently requires companies to mark-to-market every quarter the exchange fluctuations on their short-term foreign currency loans. Responding to industry chamber Assocham’s request for accounting relief on short-term foreign currency loans, the Corporate Affairs Ministry has conveyed that accounting relief provided in the Accounting Standard-11 are available only to long-term borrowings.
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29/10/2012
Makeover for M&A accounting
The outdated AS-14 deals only with amalgamations and not demerger, spinoffs, capital reduction, distribution and organisation restructuring. It could end up providing counter-intuitive results.
Merger and acquisition, or M&A, is a broad term used for various transactions such as acquisition of shares, amalgamation of companies, demergers or spinoffs, slump sale, capital reduction or simply balance-sheet restructuring. A common driver for M&A transactions is growth through acquisition of new business or streamlining operations to increase economies of scale and reduce cost. Some transactions may involve separating the various businesses of a company to unlock their value. A large non-listed entity may merge with a small listed entity to seek immediate listing. Sometimes, an amalgamation may be driven purely by convenience. For example, a parent company may have just one subsidiary, which it could merge with itself.
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22/10/2012
Delving into digital audits
With the digitisation of information, and advent of new technologies and electronic infrastructure in business, traditional computerised auditing or electronic data processing has been transformed. It is now a specialised systems- and process-oriented technological role that needs to meet the requirements of regulators and regulatory changes in the auditing profession.
An audit is no longer centred around the IT system, requiring manual intensive sampling methods to review loads of documents. It has evolved into a system involving a deeper and broader understanding of the clients’ key business processes relevant to financial reporting, and testing of automated controls, most of which are integrated within the system.
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15/10/2012
Real-estate accounting — which way to leap?
Thanks to the high returns, real estate is an attractive sector for most investors. Though the international market may have taken a hit due to the sub-prime crisis, analysts see good demand in the domestic market. With the growth opportunities leading to increased participation by global investors, there is need to align the industry’s financial reporting principles to global standards. In 2008, the International Financial Reporting Interpretations Committee (IFRIC) of the International Accounting Standards Board (IASB) issued the ‘Agreements for the Construction of Real Estate’, clarifying on accounting and financial reporting issues, including
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15/10/2012
Levelling the grounds for revenue recognition
The growth opportunities and the increased participation by various stakeholders have given rise to the need for a standard and consistent accounting and financial reporting practices for real estate transactions. Factors such as a fast-growing urban middle-class, rise in organised retail, growth of the IT sector, and easy availability of finance for buying houses have led to tremendous growth and corporatisation of the real estate sector.
This sector has also emerged as one of the best investment opportunities for Indian and foreign investors. The significant amount of foreign direct investment over the last five years in real estate is testimony to this. The growth opportunities and the increased participation by various stakeholders have given rise to the need for a standard and consistent accounting and financial reporting practices for real estate transactions.
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08/10/2012
More factors at play in financial reports
Companies prepare financial statements for reporting to shareholders, regulators, tax authorities, and other stakeholders such as bankers and lenders. The statements are prepared in accordance with the accounting standards issued by the Institute of Chartered Accountants of India, and notified by the Ministry of Corporate Affairs. However, there are several other factors that are increasingly influencing the financial reporting process.
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01/10/2012
Does accounting for exchange difference signal discomfort for IFRS?
Indian accounting practice for accounting for exchange differences arising from changes in foreign exchange rates differs from that stipulated in IFRS and adopted by Indian standard setters while formulating AS-11, The Effect of Changes in Foreign Exchange Rates. Exchange difference arises due to change in exchange rates. For example, a company borrowed US $ 1,000 to purchase equipment when the exchange rate was $1 = Rs 50. The loan and the asset were recorded at Rs 50,000. On the reporting date (March 31, 2012) the exchange rate is $1 = Rs 55. The loan is reported at Rs 55,000 resulting in an exchange difference of Rs 5,000 for the year 2011-12.If at the settlement date in 2012-13 the exchange rate is $1 = Rs 56, exchange difference of Rs 1,000 arises for the year 2012-13. As per AS-11 theexchange differences of Rs 5,000 should be recognised as an expensefor the year 2011-12 and Rs 1,000 should be recognised as an expensefor the year 2012-13. The government through various notifications has suspended the mandatory application of this rule up to March 31, 2020 so far it applies to the accounting for exchange differences related to a long term (more than 12 months at the date of origination) asset or liability.
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