IndianCAs by Ashwin Nagar

22 July 2010

Cos lining up offers may have to clarify IFRS valuation changes

Four PSUs also eyeing public issues.

There can be no assurance that our adoption of IFRS will not adversely affect our reported results of operations or financial condition, and any failure to successfully adopt IFRS by April 2011 could have a material adverse effect on our stock price. — Engineers India prospectus

Jayanta Mallick

Kolkata, July 21

Large public sector companies that are offering shares before April 1 may have to take a stand on issues related to transition to the International Financial Regulation Standards (IFRS).

These companies, which are filing draft red herring prospectus (DRHP), cannot avoid referring to the transition. They have to explain the likely impact the change in accounting system will have on valuations.

The transition to IFRS is likely to happen from April 1 next year.

Engineers India, Hindustan Copper, Coal India and SAIL are planning IPOs before April 1 next year.

Engineers India, which has already filed its DRHP, explained its position vis-à-vis the transition in the document. Hindustan Copper told Business Line that it would also do the same.

No legal requirement

Coal India and SAIL are expected to talk about the issues related to the transition in their respective DRHPs, to be filed before April 1 next year.

Mr Jamil Khatri, Head of Accounting Advisory Services, KPMG in India, said: "Companies that file a DRHP prior to April 1, 2011, would need to determine the date from which IFRS will be applicable for them. If a company files a DRHP prior to April 1, 2011, and expects to transition to IFRS from April 1, 2011, it would have to consider the need to present investors with IFRS compliant numbers for historical periods included in the DRHP.

"While this is not a legal requirement, investor interest would be best served if their investment decisions are based on numbers computed on a basis that the company will use going forward."

Hindustan Copper Ltd, which is preparing a DRHP for its share offer, is transitioning into IFRS next fiscal.

It's Chairman and Managing Director, Mr Shakeel Ahmed, said that the company's DRHP would deal with IFRS related issues and would provide clarifications in the context of the transition.

Engineers India has considered the transition as a risk factor. It said in the DRHP: "Significant differences exist between Indian Generally Accepted Accounting Practices (GAAP) and other accounting principles, such US GAAP and IFRS, which may be material to investors' assessment of our financial condition and results of operations."

Interestingly, Indian GAAP does not have a concept of restatement of comparatives except in case of special-purpose financial statements prepared for a public offer of securities.

Engineers India said that it had not determined the impact IFRS adoption would have on the company's financial reporting.

"There can be no assurance that our adoption of IFRS will not adversely affect our reported results of operations or financial condition, and any failure to successfully adopt IFRS by April 2011 could have a material adverse effect on our stock price," it said.

In the first phase, Sensex and Nifty companies, entities with net worth over Rs 1,000 crore and local companies whose shares are listed abroad are required to be IFRS compliant from the next financial year.

The companies, which are not issuing shares, would have enough time for handling this changeover issues as the converged standards are only applicable to annual consolidated results.

Financial year

Mr Jagannadham Thunuguntla, Equity Head of SMC Capital Ltd, said the companies that follow the April-March financial year would need to effect the transition for the first time in the annual consolidated result of 2011-12. Those companies that begin financial year other than in April will have more time.

According to experts, IFRS will impact revenues, earnings, book values and debt. Investors need to think through the issue of comparability between peer companies and look for off-balance sheet elements in the standalone statement

"Many investors may have applied global benchmark PE multiples to previous earnings computed as per Indian GAAP. In such cases, it may be logical to apply the global benchmark multiples to comparable earnings computed under IFRS," added Mr Khatri of KPMG.

Internal vs statutory auditors

S.MURLIDHARAN

Internal audit is about efficiency and effectiveness of the audit entity, whereas statutory audit is about truth and fairness of accounts.

It is not uncommon for a teacher himself to make a grave mistake on the subject he teaches day in and day out. It is not uncommon either for a skilled sportsman to goof-up on something fundamental. The ICAI too has now forgotten its own lessons — internal audit is about efficiency and effectiveness of the audit entity, whereas statutory audit is about truth and fairness of accounts.

The line of demarcation is clear, though admittedly there can be overlapping areas given the focus of both on accounting information in the main. An internal auditor is not a conscious keeper nor entrusted with the role of blowing the whistle so much so that all these years no eyebrows went up when he was found to be one of the employees as was the case with Satyam whose promoters defrauded the company and its shareholders on a gargantuan scale pulling wool over everybody's eyes for several years.

The ICAI seems to have come to the conclusion that the internal auditor ought to be an outsider lest his independence and objectivity are compromised and the reason for this dawning realisation and change of heart is that Raju and others forged documents and committed other frauds using the internal auditor as the handmaiden.

It has not occurred to it that the chief accounts officer or for that matter anyone at all in the company well-versed with accounts, finance and banking could have come equally handy. Implicit in the ICAI's stance is the view that the internal auditor far from blowing the whistle was in fact complicit in the fraud and that an outsider, on the other hand, would have blown the whistle besides refusing to play ball with the management.

There is a school of thought which believes that external internal auditors are better than the internal-internal auditors because they are more hands-on and less hand-washing in their approach to the work. May be, but the key question is the role of the internal auditor vis-à-vis that of the statutory auditor.

Role of internal auditor

The internal auditor's remit is to ensure that the system and internal controls are not only in place but foolproof as well. And in addition he has to ensure that resources are used efficiently and effectively.

To wit, a statutory auditor does not lose sleep over under-utilisation of capacity whereas this would figure prominently in the internal auditor's report to the management.

Missing cash of course should exercise the minds of both. But if the internal auditor is drafted by the management for the dubious role of forging of documents and accounts in a manner of fence eating the crop and the statutory auditor says he has had no clue all these years as to the goings on, well it is more a reflection on the quality of the statutory auditor than on having an internal-internal auditor.

The buck stops with the statutory auditor. For, the law places on him the onerous responsibility of pronouncing on the truth and fairness of accounts. Accounts obviously cannot be true and fair when either the sales are inflated or huge cash is missing or both. The point is internal auditor's remit is limited and different.

On paper, an outsider internal auditor can be counted upon to be more objective and independent but a moment's reflection would show that he is as much beholden to the management for his office as the internal-internal auditor so much so that he too can be pusillanimous enough in looking the other way if not involve himself directly in the fraud.

The ICAI's change of heart seems to suggest that Satyam happened because of the failure of internal audit. The truth is it was a management fraud and would have happened with the connivance of anyone with a supple conscience and, therefore, it would be idle to wish that an outsider internal auditor is going to emerge as the knight in a shining armour to refurbish the image of the auditing profession and prevent frauds from happening.

(The author is a Delhi-based chartered accountant.)

19 July 2010

CA Reults Analysis

Monday, July 19, 2010
	Ministry of Corporate Affairs
	THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ANNOUNCES THE RESULTS OF EXAMS CONDUCTED IN MAY- JUNE THIS YEAR
	19:9 IST

	The Institute of Chartered Accountants of India (ICAI) here today announced the following results: 1) Chartered Accountants Final (existing) held in May, 2010. 2) Chartered Accountants Final (New Course) held in May, 2010. 3) Common Proficiency Test (Paper- Pencil Mode) held on June 20, 2010. Since December1949, the Chartered Accountancy Examination is held twice in a year. The toppers of Chartered Accountants Final (existing) Examinations held in May, 2010 are: Mr. Nirmal Jain (1^st) from Nagaur (Rajasthan), Mr. Sourav Lachhiramka (2^nd) from Kolkata and Mr. Archit Atulbhai Shah (3^rd) from Ahmedabad. The toppers of Chartered Accountants Final (New Course) exam held in May, 2010 are: Ms. Sanjhi Agrawal (1^st) from New Delhi, Mr. Hardik Jagdish Thakkar from Mumbai and Mr. Raghav Aggarwal from Sri Ganganagar (Rajasthan). Ms. Ishita Garg of Udaipur (Rajasthan) topped the Common Proficiency Test (Paper-Pencil Mode). ----------------------------------- KKP/ska

--
Best Wishes

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Chartered Accountant
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17 July 2010

Rupee Font for Currency Symbol in Excel [2 Attachments]

[Attachment(s) from Ashwin Nagar included below]

Dear member,

want to install Rupee symbol to Excel?

ttf file attached

Go to Run type fonts & copy paste in the folder Rupee.ttf file
Link

http://www.box.net/shared/ jtjcv6pixm

use Symbolize.xla file to use in excel as currency symbol instead of $
Link

http://www.cpearson.com/excel/ chars.htm

Attachment(s) from Ashwin Nagar

2 of 2 File(s)

Symbolize.xla

Rupee.ttf

10 July 2010

e-Filing Mandatory

Income-tax (Seventh Amendment) Rules, 2010 – Amendment in rule 12

Notification No. 49/2010[F.No.142/15/2010-TPL], dated 9-7-2010

In exercise of the powers conferred by section 295 read with section 139 of Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely : -

(1) These rules may be called the Income-tax (7^th Amendment) Rules, 2010.

(2) They shall come into force from the date of their publication in the Official Gazette.

In the Income-tax Rules 1962, in rule 12, in sub-rule (3), in the proviso, for clause (a), the following clauses shall be substituted, namely :-

"(a) a firm required to furnish the return in Form ITR-5 and to whom provisions of section 44AB are applicable shall furnish the return in the manner specified in clause (ii) or clause (iii);

(aa) an individual or HUF required to furnish the return in Form ITR-4 and to whom provisions of section 44AB are applicable shall furnish the return for Assessment Year 2010-11 and subsequent Assessment Years in the manner specified in clause (ii) or clause (iii);

(ab) a company required to furnish the return in Form ITR-6 shall furnish the return for Assessment Year 2010-11 and subsequent Assessment Years in the manner specified in clause (ii)'

07 July 2010

Transfer Pricing Alert [1 Attachment]

[Attachment(s) from Ashwin Nagar included below]

Dear All,

Please find attached herewith Transfer Pricing Alert in a landmark ruling, Delhi High Court has, in the case of Maruti Suzuki India Ltd, made observations on proper opportunity to be provided by tax authorities before taking any adverse decision and on the determination of the arm's length price of intangible in the form of trademark.

Trust the same will be useful.

Attachment(s) from Ashwin Nagar

1 of 1 File(s)

Transfer

05 July 2010

IndianCAs: Master Circulars dated 01-07-2010 issued by RBI (UCB) [1 Attachment]

[Attachment(s) from Ashwin Nagar included below]

Find Master circulars dated 01-07-2010 issued by RBI as applicable to UCB for your reference.

| Ashwin Nagar | FCA and SAP-FICO\SEM-BCS |

Success is not permanent and failure is not final

Ph: India: +91-98330-15352 US: +1-323-325-4111

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Attachment(s) from Ashwin Nagar

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UCB

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04 July 2010

IndianCAs: Cheques with corrections to be cleared till Dec 1

Cheques with corrections to be cleared till Dec 1

Parnika Sokhi. Mumbai

Don't be fooled if a bank tells you it cannot clear cheques with cancellations from Today. The Reserve Bank of India (RBI) has clarified that customers need to comply with its guidelines for standardisation of cheques from December 1 and not July 1 as proclaimed by some banks.

The guidelines issued by the RBI in February had specified cheques with cancellations or corrections won't be cleared. The RBI said in a notification last week that these guidelines are applicable only where the Cheque Truncation System (CTS) is in place.

Under the CTS, the cheque's image is sent for verification instead of the original bill. This ensures faster processing compared to the three days it takes for clearance. Therefore, cheques with errors cannot be processed under the CTS. At present, only the Delhi NCR region has implemented the CTS on a pilot basis. Chennai will implement it by the year-end, also on a pilot basis.

The RBI guidelines are not applicable to cheques cleared under other systems like the magnetic ink character recognition (MICR) clearing, non-MICR clearing, over-the-counter collection (for cash payment) or direct collection of cheques outside the clearing house arrangement. The RBI said the guidelines have been introduced to curtail frauds due to alterations and to protect banks and customers.

(Source: DNA)

| Ashwin Nagar | FCA and SAP-FICO\SEM-BCS |

Success is not permanent and failure is not final

Ph: India: +91-98330-15352 US: +1-323-325-4111

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01 July 2010

Cenvat Credit - Clean energy Cess

Government of India

Ministry of Finance

(Department of Revenue)

New Delhi, the 29^th June, 2010.

Notification No. 26/ 2010-Central Excise (N.T.)

G.S.R. 565 (E). – In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:-

1. (1) These rules may be called the CENVAT Credit (Third Amendment) Rules, 2010.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the CENVAT Credit Rules, 2004, in rule 3, in sub-rule (4), after the fourth proviso, the following proviso shall be inserted, namely:-

"Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Clean Energy Cess leviable under section 83 of the Finance Act, 2010 (14 of 2010) :"

[F.No. 354/ 72/2010 –TRU]

(K.S.V.V. Prasad)

Under Secretary to the Government of India

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated the 10th September, 2004 vide Notification No. 23/2004-Central Excise (N.T.) dated the 10th September 2004, published vide G.S.R. 600(E), dated the 10^th September, 2004 and last amended by Notification No. 25/2010-Central Excise (N.T.) dated 22^nd June 2010, published vide G.S.R. 542(E), dated the 22^nd June 2010.