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noreply@blogger.com (Unknown) — Mon, 13 Jun 2011 11:13:00 +0530

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Green Initiative in the Corporate Governance

noreply@blogger.com (Unknown) — Tue, 24 May 2011 12:12:00 +0530

Green Initiative in the Corporate Governance- MCA gives green signal to holding of Meeting of Board of Directors and Meeting of Shareholders through Video Conferencing

In a fantastic initiative taken by Ministry of Corporate Affairs, holding of Meeting of Board of Directors and Meeting of Shareholders through Video Conferencing has been given a go ahead vide General Circular no 28/2011 and 27/2011 respectively.

Followings are the main points covered in the circular.

Participation by directors in meetings of Board/ Committee of directors under the Companies Act, 1956 through electronic mode (General Circular No 28/2011 dated 20 May, 2011):

Important Points:

Notice of the meeting should inform the directors regarding availability of participation through video conference and provide necessary information to enable directors to access the available facility of video conferencing.
Notice of the meeting must seek confirmation from the directors as to whether the director shall attend the meeting physically or electronic mode and shall also contain the contact number(s)/e-mail addresses of the Secretary/designated officer to whom the directors shall confirm in this regard.
In the absence of any confirmation from the director, it will be presumed that he/she will physically attend the meeting.
Every Director must attend personally at least one meeting, a financial year of the company.
At the start of such a meeting, a roll call shall be made by the Chairman/Secretary. Every director/authorized participant shall state, for the record, the following

a. Full Name,
b. Location,
c. That he/she can clearly see and communicate with all the other participants,
d. And will ensure that no one other than the concerned director or authorized participant is attending the meeting through electronic mode.

Once the above procedure is complete the Chairman/Secretary shall confirm the participation of the directors in the meeting who are not physically present. After, the roll call, the Chairman/Secretary may certify the presence of a quorum.
A roll call must also be taken at the conclusion of the meeting and at re-commencement after every break to ensure quorum throughout the meeting.
Directors participation through Video Conferencing shall be counted for the purpose of quorum.
The place where the Chairman/Secretary is sitting shall be taken as the place of the meeting, in terms of Section 288 of the Act, and all recordings will be made at this place.
The statutory registers required to be kept at such a meeting shall be kept before the Chairman for compliance of the Act.
The statutory registers required to be signed by other directors shall be deemed to be signed by the directors participating in such a meeting if they have given their consent to that effect in the meeting.
If a motion is subjected to and there is a need to vote, the Chairman/Secretary shall call the roll and note the vote of each director who should identify himself.
At the end of such meeting, the Chairman shall announce the summary of decisions taken in the meeting in respect of each agenda item and names of the directors who have consented or dissented to those decisions.
Video recording of that part of meetings where decisions were taken and votes were casted shall be preserved by the company for a minimum of 1 (One) year from the conclusion of each such meeting.
In the minutes Chairman, shall also confirm the mode of attendance of every director of the company during last three (3) meetings whether personally or through electronic mode.
Draft minutes of the meeting in soft copy shall be circulated in soft copy not later than 7 days of the meeting for comments/confirmation to the directors who attended the meeting to dispel all doubts on matters taken up during the meeting.
Once the above formalities are completed, the minutes of the meeting shall be entered into the minute book, in the manner prescribed under Section 193 of the Act. The minutes shall also disclose the particulars of the directors who attended through electronic mode.

Participation by shareholders in general meetings under the Companies Act, 1956 through electronic mode. (General Circular No 27/2011 dated 20 May, 2011):

Important Points:

Notice of the meeting should inform the directors regarding availability of participation through video conference and provide necessary information to enable directors to access the available facility of video conferencing.
The Place of meeting requirement u/s 166 and quorum requirements under Section 174 of the Companies Act will have to be complied with.
In a General Meeting where the shareholders are allowed to participate through electronic mode, the quorum as required u/s 174 of the Companies Act, 1956 as well as Chairman of the meeting shall have to be physically present at the place of the meeting. It means members participation through Video Conferencing will not be counted for the purpose of quorum.
Listed companies may provide video conferencing connectivity during such meetings at least at 5 (Five) places in India. The MCA has recommended that such places be located all over India in a way that they cover top 5 (Five) States/UTs, based on maximum number of members or at least 1000 members whichever is more, residing as per the address registered with the depositories.
In order to ensure a secured electronic platform for capturing accurate electronic voting, the process notified by the MCA Circular No. 21/2011 dated 2 May 2011 must be followed.

The Chairman of the meeting and Secretary shall assume the following responsibilities in the process of participation through video conferencing:

To safeguard the integrity of the meeting via video conferencing,
To ensure proper video conference equipment/facilities,
To prepare minutes of the meeting,
To ensure that no one other than the shareholder or proxy to the shareholder is attending the meeting through electronic mode,
If a statement of a participant in such a meeting is interrupted or garbled, then the Chairman or the Secretary must request for a repeat or reiteration, and if required, the Chairman or the Secretary must repeat what he/she heard the participant saying, for confirmation or correction.

RATES OF PROVISIONING FOR NPAS AND RESTRUCTURED ADVANCES REVISED

noreply@blogger.com (Unknown) — Sat, 21 May 2011 11:19:00 +0530

Ehancement of Rates of Provisioning for Non-Performing Assets and Restructured Advances

CIRCULAR NO. DBOD.NO.BP.BC. 94 /21.04.048/2011-12, DATED 18-5-2011

Please refer to paragraph 110 of the Monetary Policy Statement for the year 2011-12 (extract enclosed) wherein it was proposed to enhance the provisioning requirements on certain categories of non-performing advances and restructured advances. Accordingly, the revised provisioning requirements for the following categories of non-performing advances and restructured advances will be as under: (the current provisioning requirements are laid down in paragraph 5 of the Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - RefDBOD.No.BP.BC.21/21.04.048/2010-11, dated July 1, 2010).

Sub-Standard Advances :

1. Advances classified as "sub-standard" will attract a provision of 15 per cent as against the existing 10 per cent. The "unsecured exposures" classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the existing 20 per cent. However, "unsecured exposures" in respect of Infrastructure loan accounts classified as sub-standard, in case of which certain safeguards such as escrow accounts are available as indicated in our circular DBOD.No.BP.BC.96/08.12.014/2009-10, dated April 23, 2010, will attract an additional provision of 5 per cent only i.e. a total of 20 per cent as against the existing 15 per cent.

Doubtful Advances :

2. Doubtful Advances will continue to attract 100% provision to the extent the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. However, in respect of the secured portion, following provisioning requirements will be applicable:

i. The secured portion of advances which have remained in "doubtful" category up to one year will attract a provision of 25 per cent (as against the existing 20 per cent);

ii. The secured portion of advances which have remained in "doubtful" category for more than one year but upto 3 years will attract a provision of 40 per cent (as against the existing 30 per cent); and

iii. The secured portion of advances which have remained in "doubtful" category for more than 3 years will continue to attract a provision of 100%.

Restructured Advances:

3. i. Restructured accounts classified as standard advances will attract a provision of 2 per cent in the first two years from the date of restructuring. In cases of moratorium on payment of interest/principal after restructuring, such advances will attract a provision of 2 per cent for the period covering moratorium and two years thereafter (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances); and

ii. Restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2 per cent in the first year from the date of upgradation (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances).

4. All other instructions on provisioning will remain unchanged. The revised provisioning norms vis-a-vis the existing norms are also summarized in Annex.

Annex

Rates of Provisioning for Non-Performing Assets and Restructured Advances

Category of Advances	Existing Rate (%)	Revised Rate (%)
Sub-standard Advances l Secured Exposures l Unsecured Exposures l Unsecured Exposures in respect of Infrastructure loan accounts where certain safeguards such as escrow accounts are available.	10 20 15	15 25 20
Doubtful Advances – Unsecured Portion	100	100
Doubtful Advances – Secured Portion l For Doubtful upto 1 year l For Doubtful > 1 year and upto 3 years l For Doubtful > 3 years	20 30 100	25 40 100
Loss Advances	100	100
Restructured accounts classified as standard advances l in the first two years from the date of restructuring ; and l in cases of moratorium on payment of interest/principal after restructuring – period covering moratorium and two years thereafter.	0.25 to 1.00 (depending upon the category of advance)	2
Restructured accounts earlier classified as NPA and later upgraded to standard category l in the first year from the date of upgradation	0.25 to 1.00 (depending upon the category of advance)	2

Extract from the Monetary Policy Statement 2011-12

Enhancement of Rates of Provisioning for Non-Performing Assets

110. In pursuance of the announcement made in the Second Quarter Review of October 2009, banks were advised in December 2009 to achieve a provisioning coverage ratio (PCR) of 70 per cent for their non-performing advances by end-September 2010. This coverage ratio was intended to achieve a counter-cyclical objective by ensuring that banks build up a good cushion of provisions to protect them from any macroeconomic shock in future. In April 2011, banks were advised to segregate the surplus of provisions under the PCR vis-a-vis as required as per prudential norms as on September 30, 2010, into an account styled as "counter-cyclical buffer". While the "counter-cyclical buffer" so created would be available to banks for making specific provisions during economic downturns, there is a need for banks to make higher specific provisions also as part of the prudential provisioning framework. Accordingly, It is proposed to enhance the provisioning requirements on certain categories of non-performing advances and restructured advances as under:

l advances classified as "sub-standard" will attract a provision of 15 per cent as against the existing 10 per cent (the "unsecured exposures" classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the existing 20 per cent);

l the secured portion of advances which have remained in "doubtful" category up to one year will attract a provision of 25 per cent (as against the existing 20 per cent);

l the secured portion of advances which have remained in "doubtful" category for more than one year but upto 3 years will attract a provision of 40 per cent (as against the existing 30 per cent);

l restructured accounts classified as standard advances will attract a provision of 2 per cent in the first 2 years from the date of restructuring, or in cases of moratorium on payment of interest/principal after restructuring, for the period covering moratorium and 2 years thereafter (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances); and

l restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2 per cent in the first year from the date of upgradation (as against existing provision of 0.25-1.00 per cent, depending upon the category of advances).

AMENDMENT IN SEBI (STOCK BROKERS AND SUB-BROKERS) REGULATIONS

noreply@blogger.com (Unknown) — Wed, 11 May 2011 10:54:00 +0530

SEBI (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2011 - Amendment in regulations 2, 16L, Chapter IIIB and Schedules I and IVA

NOTIFICATION NO. LAD-NRO/GN/2011-12/01/11486, DATED 6-4-2011

In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992, namely:—

1. These Regulations may be called the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2011.

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

3. In the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992:—

(i) in regulation 2, in clause (fa), after the words "derivatives segment of a stock exchange" the words "or currency derivatives segment of a stock exchange" shall be inserted;

(ii) in Chapter IIIB, the words "clearing member", wherever appearing, shall be substituted with the words "clearing member or self-clearing member";

(iii) in regulation 16L,—

(a) after sub-regulation (3), the following shall be inserted, namely:—

"(4) An applicant who desires to act as a self-clearing member, in the currency derivatives segment of a stock exchange, in addition to complying with the requirements of sub-regulation (1), shall deposit at least a sum of rupees fifty lakh with the clearing corporation or clearing house of the currency derivatives segment in such form, and shall maintain such net worth, as may be specified by the Board from time to time."

(b) in the Explanation, the symbols, numbers and word "(2) and (3)" shall be substituted with "(2), (3) and (4)";

(iv) in Schedule I, in Form AB and DB, the words "clearing member", wherever appearing, shall be substituted with the words "clearing member or self-clearing member";

(v) in Schedule IVA, the words "clearing member", wherever appearing, shall be substituted with the words "clearing member or self-clearing member".

MCA has permitted service of documents through e-mail with some issues clarified

noreply@blogger.com (Unknown) — Sat, 30 Apr 2011 07:54:00 +0530

Sometimes before Postal Department has discontinued the UPC service namely the facility of Certificate of Posting.

Consequent upon which our Ministry of Corporate Affairs had permitted the service of documents upon the Shareholders through e-mail instead of physical mode. To that effect, MCA had come out with a Circular No.17/2011 dated 21.04.2011 informing that the documents which are required to be served to members can be done by way of email (u/s 53 of the Companies Act 1956).

However there was no clarity in the said circular as to sending of full set of annual report through e-mail will be in compliance with provisions of the Section 219 of the Companies Act 1956.

Since this issue was arised by various Industry bodies and Professionals, now the MCA came out with an another circular prescribing procedure to be followed in line with requirements
to be complied with as per provisions of Section 53 and Section 219 of the Companies Act 1956, the text of that recent circular reproduced below for the benefit of the readers:

+++++++++++++++++++++++++++++++++++++++++++++++++++++

CLARIFICATION REGARDING SENDING COPIES OF BALANCE SHEETS AND AUDITORS REPORT ETC., TO THE MEMBERS OF THE COMPANY AS REQUIRED UNDER SECTION 219 OF THE COMPANIES ACT, 1956 THROUGH ELECTRONIC MODE

Circular No. 18/2011, Dated: 29.4.2011

Subject : Green Initiative in the Corporate Governance- Clarification regarding sending copies of Balance Sheets and Auditors Report etc., to the members of the company as required under section 219 of the Companies Act, 1956 through electronic mode.

Sir,

The Ministry of Corporate Affairs has taken a “Green Initiative in the Corporate Governance”by allowing paperless compliance by the Companies after considering sections 2, 4, 5, and 81 of the Information Technology Act, 2000 for legal validity of compliance under Companies Act, 1956 through electronic mode.

2. The Ministry has been receiving representations from various Industry bodies to dispense with sending physical Annual report of a Company comprising of Balance Sheet, Profit & Loss Account, Director’s Report, Auditor’s Report etc. to its Members as required under section 219 of the Companies Act, 1956 and in lieu of the same the companies may be permitted to send the aforesaid documents by E-Mail to it Members.

3. Section 4 of the Information Technology Act, 2000, provides as under:

“Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is- (a) rendered or made available in an electronic form and (b) accessible so as to be usable for a subsequent reference.”

4. In the light of the above provisions and circumstances it is hereby clarified that the company would be in compliance of sections 219(1) of Companies Act, 1956, in case, a copy of Balance Sheet etc., is sent by electronic mail to its member subject to the fact that company has obtained -

(a) e-mail address of its member for sending the Notice with Balance sheet, Profit & Loss Account, Auditor’s Report, Director’s Report, and Explanatory Statement etc through e-mail, after giving an advance opportunity to the member to register his e-mail address and changes therein from time to time with the company or with the concerned depository.

(b) Company’s website display full text of these documents well in advance prior to mandatory period and issue advertisement in prominent newspapers in both vernacular and English statingthat the copies of aforesaid documents are available in the website and for inspection at the Registered Office of the company during office hours. Website must be designed in a way so that documents can be opened easily and quickly.

(c)In cases where any member(s) has not registered his e-mail address for receiving the Balance Sheet etc through e-mail, the Balance Sheet etc., will be sent by other modes of services as provided under section 53 of the Companies Act, 1956.

(d) In case any member(s) insist for physical copies of above documents, the same should besent to him physically, by post free of cost.

+++++++++++++++++++++++++++++++++++++++++++++++

Repeated buy-back offers not to be encouraged: SEBI

noreply@blogger.com (Unknown) — Thu, 28 Apr 2011 12:09:00 +0530

SEBI has in its recent order, allowing the Deccan Chronicle Holdings Limited (“Deccan Chronicle”) to buy-back 3.45 crore shares, stated that “repeated buy-back offers by a company is not something that SEBI, as a regulator, would like to encourage, given the fact that it could be misused by entities to consolidate their holding at the expense of the company”. This was the second time in the last two years that Deccan Chronicle had sought the permission of SEBI for exemption from the requirements of Takeover Code to come out with an offer to buy-back its shares. In July 2009 SEBI had granted Deccan Chronicle exemption from the requirements under the Takeover Code for increasing its voting rights from 63% to 73.51% pursuant to buy-back offer proposed by the target company. Thereafter, the target company had made the buy-back offer during August, 2009, wherein 4.84% of the total voting capital of the target company was bought back. In the present case, the Promoters again sought exemption from the requirements under the Takeover Code for increasing their voting rights from 63.37% to 73.83% (assuming 100% response) pursuant to buy-back offer proposed by the target company. SEBI vide its order dated 15 April 2011 granted Deccan Chronicle Holdings exemption from the requirements under the Takeover Code for the second proposed buy back of shares. However SEBI directed Deccan Chronicle not to seek any further exemption pursuant to any further buy-back offers by the target company. SEBI also stated that repeated buyback offers could be misused by acquires to consolidate their holding at the expense of the company and this is not something that SEBI, as a regulator, would like to encourage.

FAQs on XBRL

noreply@blogger.com (Unknown) — Sun, 10 Apr 2011 19:59:00 +0530

What is XBRL?

XBRL is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data. XBRL stands for eXtensible Business Reporting Language. It is already being put to practical use in a number of countries and implementations of XBRL are growing rapidly around the world.

Who developed XBRL?

XBRL is an open, royalty-free software specification developed through a process of collaboration between accountants and technologists from all over the world. Together, they formed XBRL International which is now made up of over 650 members, which includes global companies, accounting, technology, government and financial services bodies. XBRL is and will remain an open specification based on XML that is being incorporated into many accounting and analytical software tools and applications.

What are the advantages of XBRL?

XBRL offers major benefits at all stages of business reporting and analysis. The benefits are seen in automation, cost saving, faster, more reliable and more accurate handling of data, improved analysis and in better quality of information and decisionmaking. XBRL enables producers and consumers of financial data to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data. They are able to concentrate effort on analysis, aided by software which can validate and process XBRL information. XBRL is a flexible language, which is intended to support all current aspects of reporting in different countries and industries. Its extensible nature means that it can be adjusted to meet particular business requirements, even at the individual organization level.

Who can benefit from using XBRL?

All types of organizations can use XBRL to save costs and improve efficiency in handling business and financial information. Because XBRL is extensible and flexible, it can be adapted to a wide variety of different requirements. All participants in the financial information supply chain can benefit, whether they are preparers, transmitters or users of business data.

What is the future of XBRL?

XBRL is set to become the standard way of recording, storing and transmitting business financial information. It is capable of use throughout the world, whatever the language of the country concerned, for a wide variety of business purposes. It will deliver major cost savings and gains in efficiency, improving processes in companies, governments and other organisations.

Does XBRL benefit the comparability of financial statements?

XBRL benefits comparability by helping to identify data which is genuinely alike and distinguishing information which is not comparable. Computers can process this information and populate both pre defined and customised reports.

Does XBRL cause a change in accounting standards?

No. XBRL is simply a language for information. It must accurately reflect data reported under different standards – it does not change them.

What are the benefits to a company from putting its financial statements into XBRL?

XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. By presenting its statements in XBRL, a company can benefit investors and other stakeholders and enhance its profile. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.

With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.

How does XBRL work?

XBRL makes the data readable, with the help of two documents – Taxonomy and instance document. Taxonomy defines the elements and their relationships based on the regulatory requirements. Using the taxonomy prescribed by the regulators, companies need to map their reports, and generate a valid XBRL instance document. The process of mapping means matching the concepts as reported by the company to the corresponding element in the taxonomy. In addition to assigning XBRL tag from taxonomy, information like unit of measurement, period of data, scale of reporting etc., needs to be included in the instance document.

How do companies create statements in XBRL?

There are a number of ways to create financial statements in XBRL:

XBRL-aware accounting software products are becoming available which will support the export of data in XBRL form. These tools allow users to map charts of accounts and other structures to XBRL tags.

Statements can be mapped into XBRL using XBRL software tools designed for this purpose

Data from accounting databases can be extracted in XBRL format. It is not strictly necessary for an accounting software vendor to use XBRL; third party products can achieve the transformation of the data to XBRL.

Applications can transform data in particular formats into XBRL. The route which an individual company may take will depend on its requirements and the accounting software and systems it currently uses, among other factors.

Government to Introduce New Financial Reporting Format from July 2011

noreply@blogger.com (Unknown) — Fri, 25 Mar 2011 22:40:00 +0530

The government is set to introduce a new financial reporting format for companies that will enable it to better monitor layered corporate structures. From July, companies will have to file annual returns using XBRL (Extensible Business Reporting Language), a tool fast emerging as the favored financial reporting format worldwide.

With XBRL, the Ministry of Corporate Affairs will be able to monitor the growth of subsidiaries of companies as all financial statements will be tagged under a single head. The new format will not only enable better organisation of data in standardised formats, but will also help detect fraudulent entries and calculations. It will be particularly useful in cases where companies have subsidiaries, which in turn have auxiliary units.

In India, the Securities and Exchange Board of India and the RBI are using this tool as part of their regulatory filings. At present, the Registrar of Companies manually checks the annual reports of companies to see how they are operating their structures. The process is daunting in the face of inadequate resources and the registrar’s authority is seldom put to effective use.

The draft Companies Bill has sought discretionary powers for the government to stop firms from establishing multiple layers of subsidiaries if they are found abusing this right.

The law, at present, allows firms to establish any number of subsidiaries, which in turn can set up their own subsidiaries. The Corporate Affairs Ministry had earlier proposed a cap on the number of layers of subsidiaries a company could set up, but it was forced to dilute its stand following lobbying. The latest draft of the Bill introduced the clause on discretionary powers for the government on recommendations of the Parliamentary Standing Committee on Finance.

Source: The Economic Times

LIST OF MAJOR DIFFERENCES BETWEEN THE OLD AND THE NEW SCH VI

noreply@blogger.com (Unknown) — Wed, 16 Mar 2011 14:20:00 +0530

Sl.	Particulars	Old Schedule VI	Revised Schedule VI
1	Rounding off of Figures appearing in financial statement	Turnover of less than Rs. 100 Crs - R/off to the nearest Hundreds, thousands or decimal thereof, Turnover of Rs. 100 Crs or more but less than Rs. 500 Crs - R/off to the nearest Hundreds, thousands, lakhs or millions or decimal thereof, Turnover of Rs. 500 Crs or more - R/off to the nearest Hundreds, thousands, lakhs, millions or crores, or decimal thereof	Turnover of less than Rs. 100 Crs - R/off to the nearest Hundreds, thousands, lakhs or millions or decimal thereof, Turnover of Rs. 100 Crs or more - R/off to the nearest lakhs, millions or crores, or decimal thereof.
2	Fixed Assets	There was no bifurcation required in to tangible & intangible assets.	Fixed assets to be shown under non-current assets and it has to be bifurcated in to Tangible & intangible assets.
3	Investments	Both current & non-current investments to be disclosed under the head investments	Current and non-current investments are to be disclosed separately under current assets & non-current assets respectively.
4	Deposits	Lease deposits are part of loans & advances	Lease deposits to be disclosed as long term loans & advances under the head non-current assets
5	Net Working Capital	Current assets & Liabilities are shown together under application of funds. The net working capital appears on balance sheet.	Assets & Liabilities are to be bifurcated in to current & Non-current and to be shown separately. Hence, net working capital will not be appearing in Balance sheet.
6	Loans & Advances	Loans & Advance are disclosed along with current assets Loans & Advance to subsidiaries & others to be disclosed separately.	Loans & Advances to be broken up in long term & short term and to be disclosed under non-current & current assets respectively. Loans & Advance from related parties & others to be disclosed separately.
7	Cash & Bank Balances	Bank balance to be bifurcated in scheduled banks & others	Bank balances in relation to earmarked balances, held as margin money against borrowings, deposits with more than 12 months maturity, each of these to be shown separately.
8	Profit & Loss (Dr Balance)	P&L debit balance to be shown under the head Miscellaneous expenditure & losses.	Debit balance of Profit and Loss Account to be shown as negative figure under the head Surplus. Therefore, reserve & surplus balance can be negative.
9	Deferred Tax Assets / Liabilities	Deferred Tax assets / liabilities to be disclosed separately.	Deferred Tax assets / liabilities to be disclosed under non-current assets / liabilities as the case may be.
10	Borrowings	Short term & long term borrowings are grouped together under the head Loan funds sub-head Secured / Unsecured.	Long term borrowings to be shown under non-current liabilities and short term borrowings to be shown under current liabilities with separate disclosure of secured / unsecured loans. Period and amount of continuing default as on the balance sheet date in repayment of loans and interest to be separately specified
11	Finance lease obligation	Finance lease obligations are included in current liabilities	Finance lease obligations are to be grouped under the head non-current liabilities
12	Sundry Creditors	Creditors to be broken up in to micro & small suppliers and other creditors.	It is named as Trade payables and there is no mention of micro & small enterprise disclosure.
13	Other current liabilities	No specific mention for separate disclosure of Current maturities of long term debt. No specific mention for separate disclosure of Current maturities of finance lease obligation	Current maturities of long term debt to be disclosed under other current liabilities. Current maturities of finance lease obligation to be disclosed.
14	Separate line item Disclosure criteria	any item under which expense exceeds one per cent of the total revenue of the company or Rs. 5,000 which ever is higher; shall be disclosed separately	any item of income / expense which exceeds one per cent of the revenue from operations or Rs. 1,00,000, which ever is higher; to be disclosed separately
15	Expense classification	Function wise & nature wise	Expenses in Statement of Profit and Loss to be classified based on nature of expenses
16	Finance Cost	Finance cost to be classified in fixed loans & other loans	Finance cost shall be classified as interest expense, other borrowing costs & Gain / Loss on foreign currency transaction & translation.
17	Foreign exchange gain / loss	Gain/Loss on foreign currency transaction to be shown under finance cost.	Gain / Loss on foreign currency transaction to be separated into finance costs and other expenses.
18	Purchases	The purchase made and the opening & closing stock, giving break up in respect of each class of goods traded in by the company and indicating the quantities	Goods traded in by the company to be disclosed in broad heads in notes. Disclosure of quantitative details of goods is diluted.

By:- Rohit Muchhal (CA Final, Kolkata)

Get in touch with me @ rohitmuchhal90@gmail.com

www.facebook.com/rohitmuchhal

www.cabible.blogspot.com

Company Law : Companies (Name Availability) Rules, 2011

noreply@blogger.com (Unknown) — Wed, 16 Mar 2011 14:16:00 +0530

Company Law : Companies (Name Availability) Rules, 2011

In exercise of the power conferred by clause (a) of sub-section (1) of section 642 read with sections 20 and 21 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following Rules:

1.(i) These Rules may be called “Companies (Name Availability) Rules, 2011”;

(ii) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

2. As per provisions contained in section 20 of the Companies Act, 1956, no company is to be registered with undesirable name. A proposed name is considered to be undesirable if it is identical with or too nearly resembling with:

(i) Name of a company in existence; or

(ii) A registered trade-mark or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999.

3. After notification of these Rules, while applying for a name in the prescribed e-form-1A, using Digital Signature Certificate (DSC), the applicant shall be required to furnish a declaration to the effect that:

(i) he has used the search facilities available on the portal of the Ministry of Corporate Affairs (MCA) i.e., www.mca.gov.in/MCA21 for checking the resemblance of the proposed name(s) with the companies and Limited Liability Partnerships (LLPs) already registered or the names already approved.

(ii) the proposed name(s) is/are not infringing the registered trademarks or a trademark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999;

(iii) the proposed name(s) is/are not in violation of the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950 as amended from time to time;

(iv) The proposed name is not offensive to any section of people, e.g., proposed name does not contain profanity or words or phrases that are generally considered a slur against an ethnic group, religion, gender or heredity;

(v) he has gone through all the prescribed guidelines, given in these Rules, understood the meaning thereof and the proposed name(s) is/are in conformity thereof;

(vi) he undertakes to be fully responsible for the consequences, in case the name is subsequently found to be in contravention of the prescribed guidelines.

4. Where, the proposed name is containing more than one word, there will be an option in the e-form 1A for certification by the practicing Chartered Accountants, Company Secretaries and Cost Accountants, who will certify that he has used the search facilities available on the portal of the Ministry of Corporate Affairs (MCA) i.e., www.mca.gov.in/MCA21 for checking the resemblance of the proposed name(s) with the companies and Limited Liability Partnerships (LLPs) already registered or the names already approved and the search report is attached with the application form. The professional will also certify that the proposed name is not an undesirable name under the provisions of section 20 of the Companies Act, 1956 and also is in conformity with Companies (Name Availability) Rules, 2011 and Guidelines made therein.

5(i). Where e-form 1A has been certified by the professional in the manner stated at ‘4’ above, the name will be made available by the system online to the applicant without backend processing by the Registrar of Companies (ROC). This facility is not available for applications for change of name of existing companies.

(ii) Where a name has been made available online on the basis of certification of practicing professional in the manner stated above, if it is found later on that the name ought not to have been allowed under provisions of section 20 of the Companies Act read with these Rules, the professional shall also be liable for penal action under provisions of the Companies Act, 1956 in addition to the penal action under Regulations of respective professional Institutes.

(iii) Where e-form 1A has not been certified by the professional, the proposed name will be processed at the back end office of ROC and availability or non-availability of name will be communicated to the applicant.

6. The name if made available, is liable to be withdrawn anytime before registration of the company, if it is found later on that the name ought not to have been allowed. However, ROC will pass an specific order giving reasons for withdrawal of name, with an opportunity to the applicant of being heard, before withdrawal of such name.

7. The name if made available to the applicant, shall be reserved for sixty days from the date of approval and further extension of thirty days with revalidation application and fees. If, the proposed company has not been incorporated within such period, the name shall be lapsed and will be available for other applicants.

8. Even after incorporation of the company, the Central Government has the power to direct the company to change the name under section 22 of the Companies Act, 1956, if it comes to his notice or is brought to his notice through an application that the name too nearly resembles that of another existing company or a registered trademark.

9. In determining whether a proposed name is identical with another, the following shall be disregarded:

(i) The words Private, Pvt, Pvt., (P), Limited, Ltd, Ltd., LLP, Limited Liability Partnership;

(ii) The words appearing at the end of the names – company, and company, co., co, corporation, corp, corpn, corp.;

(iii) The plural version of any of the words appearing in the name;

(iv) The type and case of letters, spacing between letters and punctuation marks;

(v) Joining words together or separating the words does not make a name distinguishable from a name that uses the similar, separated or joined words;

(vi) The use of a different tense or number of the same word does not distinguish one name from another;

(vii) Using different phonetic spellings or spelling variations does not distinguish one name from another. For example, J.K. Industries limited is existing then J and K Industries or Jay Kay Industries or J n K Industries or J & K Industries will not be allowed. Similarly if a name contains numeric character like 3, resemblance shall be checked with ‘Three’ also;

(viii) Misspelled words, whether intentionally misspelled or not, do not conflict with the similar, properly spelled words;

(ix) The addition of an internet related designation, such as .COM, .NET, .EDU, .GOV, .ORG, .IN does not make a name distinguishable from another, even where (.) is written as ‘dot’;

(x) The addition of words like New, Modern, Nav, Shri, Sri, Shree, Sree, Om, Jai, Sai, The, etc. does not make a name distinguishable from an existing name such as New Bata Shoe Company, Nav Bharat Electronic etc. Similarly, if it is different from the name of the existing company only to the extent of adding the name of the place, the same shall not be allowed. For example, ‘Unique Marbles Delhi Limited’ cannot be allowed if ‘Unique Marbles Limited’ is already existing;

Such names may be allowed only if no objection from the existing company by way of Board resolution is produced/ submitted;

(xi) Different combination of the same words does not make a name distinguishable from an existing name, e.g., if there is a company in existence by the name of “Builders and Contractors Limited”, the name “Contractors and Builders Limited” should not be allowed;

(xii) If the proposed name is an exact Hindi translation of the name of an existing company in English especially an existing company with a reputation, e.g., Hindustan Steel Industries Ltd. will not be allowed if there exists a company with name ‘Hindustan Ispat Udyog Limited’;

Guidelines for availability of name

10. In supersession of all the previous circulars and instructions regarding name availability, the applicants and Registrar of Companies are also advised to adhere following guidelines while applying or approving the proposed name:

(i) It is not necessary that the proposed name should be indicative of the main object. However, in case the proposed name is indicative of any activity, the same will be appropriately reflected in the main object clause of the Memorandum of Association;

(ii) If the Company’s main business is finance, housing finance, chit fund, leasing, investments, securities or combination thereof, such name shall not be allowed unless the name is indicative of such related financial activities, viz., Chit Fund/ Investment/ Loan, etc.;

(iii) If it includes the words indicative of a separate type of business constitution or legal person or any connotation thereof, the same shall not be allowed. For e.g. co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.;

(iv) Abbreviated name such as ‘ABC limited’ or ‘23K limited’ cannot be given to a new company. However the companies well known in their respective field by abbreviated names are allowed to change their names to abbreviation of their existing name (for Delhi Cloth Mills limited to DCM Limited, Hindustan Machine Tools limited to HMT limited) after following the requirement of section 21 of the Companies Act, 1956;

(v) If the proposed name is identical to the name of a company dissolved as a result of liquidation proceeding should not be allowed for a period of 2 years from the date of such dissolution since the dissolution of the company could be declared void within the period aforesaid by an order of the Court under section 559 of the Act. Moreover, if the proposed name is identical with the name of a company which is struck off in pursuance of action under section 560 of the Act, then the same shall not be allowed before the expiry of 20 years from the publication in the Official Gazette being so struck off since the company can be restored anytime within such period by the competent authority;

(vi) If the proposed names include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual fund’ etc., the name may be allowed with a declaration by the applicant that the requirements mandated by the respective regulator, such as IRDA, RBI, SEBI, MCA etc. have been complied with by the applicant;

(vii) If the proposed name includes the word “State”, the same shall be allowed only in case the company is a Government company. Also, if the proposed name is containing only the name of a continent, country, state, city such as Asia limited, Germany Limited, Haryana Limited, Mysore Limited, the same shall not be allowed;

(viii) If a foreign company is incorporating its subsidiary company, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian state or city, if otherwise available;

(ix) Change of name shall not be allowed to a company which is defaulting in filing its due Annual Returns or Balance Sheets or which has defaulted in repayment of matured deposits and debentures and/or interest thereon;

(x) With a view to maintain uniformity, the following guidelines may be followed in the use of keywords, as part of name, while making available the proposed names under sections 20 and 21 of the Companies Act, 1956:

S.No.	Key Words	Required authorized capital (in Rs.)
1	Corporation, corp, corpn, corp.	25 crore
2	international, Globe, Global, World, Overseas, Universe, Universal, Continent, Continental, Inter Continental, Asiatic, Asia, Asian being the first word of the name	5 crore
3	If any of the words at (2) above is used within the name (with or without brackets)	2 crore
4	Hindustan, India, Indo, Indian, Bharat, Bharatvarsh, Bhartiya or any other country’s name being first word of the name	2 crore
5	If any of the words at (4) above is used within the name (with or without brackets)	25 lakh
6	Industries/ Udyog	5 crore
7	Enterprises, Products, Business, Manufacturing, Venture.	50 lakh

Latest MCA Updates

noreply@blogger.com (Unknown) — Tue, 22 Feb 2011 15:36:00 +0530

Amendment in Schedule XIII

Click to check the impact of amendment in Schedule XIII

MCA Links

EXEMPTION FROM PROVISION OF SECTION 212 OF COMPANIES ACT 1956

noreply@blogger.com (Unknown) — Wed, 9 Feb 2011 17:32:00 +0530

MCA GRANTS GENERAL EXEMPTION FROM PROVISION OF SECTION 212 OF COMPANIES ACT 1956

As big relief to companies having large number of subsidiaries, the Ministry of Corporate Affairs has granted general exemption to all companies from complying with the provision of section 212 of the Companies Act 1956 subject to complying with the following conditions:-

The Board of Directors of the Company has by resolution given consent for not attaching the balance sheet of the subsidiary concerned;
The company shall present in the annual report, the consolidated financial statements of holding company and all subsidiaries duly audited by its statutory auditors;
The consolidated financial statement shall be prepared in strict compliance with applicable Accounting Standards and, where applicable, Listing Agreement as prescribed by the Security and Exchange Board of India;
The company shall disclose in the consolidated balance sheet the following information in aggregate for each subsidiary including subsidiaries of subsidiaries:- (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (except in case of investment in the subsidiaries) (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation (j) proposed dividend;
The holding company shall undertake in its annual report that annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the head office of the holding company and of the subsidiary companies concerned and a note to the above effect will be included in the annual report of the holding company. The holding company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand;
The holding as well as subsidiary companies in question shall regularly file such data to the various regulatory and Government authorities as may be required by them;
The company shall give Indian rupee equivalent of the figures given in foreign currency appearing in the accounts of the subsidiaries companies along with exchange rate as on closing day of the financial year.

Click To Download

50 Paise Coins to be Minimum Denomination Coin Acceptable for Transaction from June 30, 2011

noreply@blogger.com (Unknown) — Thu, 20 Jan 2011 12:26:00 +0530

Government Calls in from Circulation Coins of Denomination of 25 Paise and below

The Central Government, Ministry of Finance has notified on December 20, 2010 to call in from circulation the coins of denomination of 25 paise and below, issued from time to time, with effect from June 30, 2011. From this date, these coins shall cease to be a legal tender for payment as well as on account. The procedure for call in shall be notified separately by the Reserve Bank of India.

Consequently, from June 30, 2011 onwards these coins will not be accepted in transactions. The minimum denomination coin acceptable for transaction will be 50 paise from that date. Also, in accounting, i.e. the entries in books of accounts, pricing of products/services/taxes shall also be rounded off to 50 paise or whole rupee from that date.

The notification was issued in exercise of the powers conferred by sub-section 15A of the Coinage Act, 1906 (3 of 1906).

CA Students Logo

noreply@blogger.com (Unknown) — Thu, 16 Dec 2010 11:55:00 +0530

Hey its not official one

Whats special in it:
- Musical signs to make us realize we are yet students and are not bound by studies only,
- Word 'CA' makes ourselves goal oriented, etc etc...

Download it by clicking :- Download CA Student logo

ROC additional Fees revised w.e.f. 5th December 2010

noreply@blogger.com (Unknown) — Mon, 22 Nov 2010 08:33:00 +0530

MCA has revise the additional ROC fees payable as per Section 611(2) of the Companies Act, 1956 (except for Form 5) as per below details with effect from 5th December 2010 :-

Upto 30 days Two times of normal filing fee

More than 30 days and upto 60 days Four times of normal filing fee

More than 60 days and upto 90 days Six times of normal filing fee

More than 90 days Nine times of normal filing fee.

In order to avoid payment of additional fees, please file within stipulated time.

Accounting Standard 7 : Accounting for Construction Contracts (Revised 2002)

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:35:00 +0530

Accounting Standard 7 : Accounting for Construction Contracts (Revised 2002)

· Applicable to accounting for construction contract.

· Construction contract may be for construction of a single/combination of interrelated or interdependent assets.

· A fixed price contract is a contract where contract price is fixed or per unit rate is fixed and in some cases subject to escalation clause.

· A cost plus contract is a contract in which contractor is reimbursed for allowable or defined cost plus percentage of these cost or a fixed fee.

· In a contract covering a number of assets, each asset is treated as a separate construction contract when there are:

· separate proposal;

· subject to separate negotiations and the contractor and customer is able to accept/reject that part of the contract;

· identifiable cost and revenues of each asset

· A group of contracts to be treated as a single construction contract when

· they are negotiated as a single package;

· contracts are closely interrelated with an overall profit margin; and

· contracts are performed concurrently or in a continuous sequence.

· Additional asset construction to be treated as separate construction contract when

· assets differs significantly in design/technology/function from original contract assets.

· a price negotiated without regard to original contract price

· Contract revenue comprises of

· initial amount and

· variations in contract work, claims and incentive payments that will probably result in revenue and are capable of being reliably measured.

· Contract cost comprises of

· costs directly relating to specific contract

· costs attributable and allocable to contract activity

· other costs specifically chargeable to customer under the terms of contracts.

· Contract Revenue and Expenses to be recognised, when outcome can be estimated reliably up to stage of completion on reporting date.

· In Fixed Price Contract outcome can be estimated reliably when

· total contract revenue can be measured reliably.

· it is probable that economic benefits will flow to the enterprise;

· contract cost and stage of completion can be measured reliably at reporting date; and

· contract costs are clearly identified and measured reliably for comparing actual costs with prior estimates.

· In cost plus contract outcome is estimated reliably when

· it is probable that economic benefits will flow to the enterprise; and

· contract cost whether reimbursable or not can be clearly identified and measured reliably.

· When outcome of a contract cannot be estimated reliably

· revenue to the extent of which recovery of contract cost is probable should be recognised;

· contract cost should be recognised as an expense in the period in which they are incurred; and

· An expected loss should be recognised as expense.

· When uncertainties no longer exist revenue and expenses to be recognised as mentioned above when outcomes can be estimated reliably.

· When it is probable that contract costs will exceed total contract revenue, the expected loss should be recognised as an expense immediately.

· Change in estimate to be accounted for as per AS 5.

· An enterprise to disclose

· contract revenue recognised in the period.

· method used to determine recognised contract revenue.

· methods used to determine the stage of completion of contracts in progress.

· For contracts in progress an enterprise should disclose

· the aggregate amount of costs incurred and recognised profits (less recognised losses) up to the reporting date.

· amount of advances received and

· amount of retention.

· An enterprise should present

· gross amount due from customers for contract work as an asset and

· the gross amount due to customers for contract work as a liability.

Accounting Standard 9: Revenue Recognition

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:35:00 +0530

Accounting Standard 9: Revenue Recognition

· Standard does not deal with revenue recognition aspects of revenue arising from construction contracts, hire-purchase and lease agreements, government grants and other similar subsidies and revenue of insurance companies from insurance contracts. Special considerations apply to these cases.

· Revenue from sales and services should be recognised at the time of sale of goods or rendering of services if collection is reasonably certain; i.e., when risks and rewards of ownership are transferred to the buyer and when effective control of the seller as the owner is lost.

· In case of rendering of services, revenue must be recognised either on completed service method or proportionate completion method by relating the revenue with work accomplished and certainty of consideration receivable.

· Interest is recognised on time basis, royalties on accrual and dividend when owner’s right to receive payment is established.

· Disclose circumstances in which revenue recognition has been postponed pending significant uncertainties.

Also refer ASI 14 (withdrawing GC 3/2002) deals with the manner of disclosure of excise duty in presentation of revenue from sales transactions (turnover).

Accounting Standard 6: Depreciation Accounting

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:34:00 +0530

Accounting Standard 6: Depreciation Accounting

· Standard does not apply to depreciation in respect of forests, plantations and similar regenerative natural resources, wasting assets including expenditure on exploration and extraction of minerals, oils, natural gas and similar non-regenerative resources, expenditure on research and development, goodwill and livestock. Special considerations apply to these assets.

· Allocate depreciable amount of a depreciable asset on systematic basis to each accounting year over useful life of asset.

· Useful life may be reviewed periodically after taking into consideration the expected physical wear and tear, obsolescence and legal or other limits on the use of the asset.

· Basis for providing depreciation must be consistently followed and disclosed. Any change to be quantified and disclosed.

· A change in method of depreciation be made only if required by statute, for compliance with an accounting standard or for appropriate presentation of the financial statements. Revision in method of depreciation be made from date of use. Change in method of charging depreciation is a change in accounting policy and be quantified and disclosed.

· In cases of addition or extension which becomes integral part of the existing asset depreciation to be provided on adjusted figure prospectively over the residual useful life of the asset or at the rate applicable to the asset.

· Where the historical cost undergoes a change due to fluctuation in exchange rate, price adjustment etc. depreciation on the revised unamortised amount should be provided over the balance useful life of the asset.

· On revaluation of asset depreciation should be based on revalued amount over balance useful life. Material impact on depreciation should be disclosed.

· Deficiency or surplus in case of disposal, destruction, demolition etc. be disclosed separately, if material.

· Historical cost, amount substituted for historical cost, depreciation for the year and accumulated depreciation should be disclosed.

· Depreciation method used should be disclosed. If rates applied are different from the rates specified in the governing statute then the rates and the useful life be also disclosed.

Accounting Standard 3: Cash Flow Statements

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:34:00 +0530

Accounting Standard 3: Cash Flow Statements

· Prepare and present a cash flow statement for each period for which financial statements are prepared.

· A cash flow statement should report cash flows during the period classified by operating, investing and financial activities.

· Operating activities are the principal revenue producing activities of the enterprise other than investing or financing activities.

· Investing activities are the acquisition and disposal of long term assets and other investments not included in cash equivalents.

· Financing activities are activities that result in changes in the size and composition of the owner’s capital and borrowings of the enterprise.

· A cash flow statement for operating activities should be prepared by using either the direct method or the indirect method. For investing and financing activities cash flows should be prepared using the direct method.

· Cash flows arising from transactions in a foreign currency should be recorded in enterprise’s reporting currency by applying the exchange rate at the date of the cash flow.

· Investing and financing transactions that do not require the use of cash and cash equivalent balances should be excluded.

· An enterprise should disclose the components of cash and cash equivalents together with reconciliation of amounts as disclosed to amounts reported in the balance sheet.

· An enterprise should disclose together with a commentary by the management the amount of significant cash and cash equivalent balances held by it that are not available for use.

Accounting Standard 2: Valuation of Inventories

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:34:00 +0530

Accounting Standard 2: Valuation of Inventories

· This standard should be applied in accounting for inventories other than WIP arising under construction contracts, WIP of service providers, shares, debentures and financial instruments held as stock in trade, producers’ inventories of livestock, agricultural and forest products and mineral oils, ores and gases to the extent measured at net realisable value in accordance with well established practices in those industries.

· Inventories are assets held for sale in ordinary course of business, in the process of production of such sale, or in form of materials to be consumed in production process or rendering of services.

· Inventories do not include machinery spares which can be used with an item of fixed asset and whose use is irregular.

· Net realisable value is the estimated selling price less the estimated costs of completion and estimated costs necessary to make the sale.

· Cost of inventories should comprise all costs incurred for bringing the inventories to their present location and condition.

· Inventories should be valued at lower of cost and net realisable value. Generally, weighted average cost or FIFO method is used in cases where goods are ordinarily interchangeable.

· Specific Identification Method to be used when goods are not ordinarily interchangeable or have been segregated for specific projects.

· Disclose the accounting policies adopted including the cost formula used, total carrying amount of inventories and its classification.

Accounting Standard 4: Contingencies and Events Occurring after the Balance Sheet Date

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:33:00 +0530

Accounting Standard 4: Contingencies and Events Occurring after the Balance Sheet Date

· A contingency is a condition or situation the ultimate outcome of which will be known or determined only on the occurrence or non-occurrence of uncertain future event/s.

· Events occurring after the balance sheet date are those significant events both favourable and unfavourable that occur between the balance sheet date and the date on which the financial statements are approved.

· Amount of a contingent loss should be provided for by a charge in P & L A/c if it is probable that future events will confirm that an asset has been impaired or a liability has been incurred as at the balance sheet date and a reasonable estimate of the amount of the loss can be made.

· Existence of contingent loss should be disclosed if above conditions are not met, unless the possibility of loss is remote.

· Contingent Gains if any, not to be recognised in the financial statements.

· Material change in the position due to subsequent events be accounted or disclosed.

· Proposed or declared dividend for the period should be adjusted.

· Material event occurring after balance sheet date affecting the going concern assumption and financial position be appropriately dealt with in the accounts.

· Contingencies or events occurring after the balance sheet date and the estimate of the financial effect of the same should be disclosed.

Note: The underlined paras/words have been withdrawn on issuance of AS 29 effective for accounting periods commencing on or after 1-4-2004.

Accounting Standard 29 : Provisions, Contingent Liabilities and Contingent Assets

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:33:00 +0530

Accounting Standard 29 : Provisions, Contingent Liabilities and Contingent Assets

· This statement should be applied in accounting for provisions and contingent liabilities and in dealing with contingent assets, other than those resulting from financial instruments that are carried at fair value, those resulting from executory contracts, those arising in insurance enterprises from contracts with policy – holders and those covered by another Accounting Standard.

· Provision is a liability, which can be measured only by using a substantial degree of estimation.

· Liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

· Contingent Liability is -

o a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or

o a present obligation, but is not recognised because it is not probable that outflow of resources embodying economic benefits will be required (or is remote) for its settlement or a reliable estimate of the amount of the obligation cannot be made.

· Contingent asset is a possible asset that arises from past events, the existence of which will be confirmed only by the occurrences or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.

· A provision should be recognised when –

o an enterprises has a present obligation as a result of a past event;

o it is probable (more likely than not) that an outflow of resources will be required to settle the obligation; and

o a reliable estimate can be made of the amount of the obligation.

· A contingent liability is not recognised in financial statements but is disclosed.

· A contingent asset is not recognised in financial statements.

· The amount of provision should be measure before tax at the best estimate of the expenditure required to settle the present obligation and should not be discounted to its present value.

· The risks and uncertainties that inevitably surround many events and circumstances should be taken into account in arriving at the best estimate of provision to avoid its under or over statement.

· Expected future events, which are likely to affect the amount required to settle an obligation, may be important in measuring provisions.

· Gains on the expected disposal of assets should not be taken into account in measuring a provision, even if the expected disposal is closely linked with the item requiring provision.

· Whenever all or part of the expenditure relevant to a provision is expected to be reimbursed by another party, the reimbursement should be recognised only on virtual certainty of its receipt. The reimbursement should be treated as a separate asset and should not exceed the amount of the provision. In the statement of profit and loss, the expense relating to a provision may be presented net of the amount recognised for a reimbursement.

· Provisions should be reviewed at each balance sheet date and adjusted to reflect the current best estimate. The provision should be reversed, if it is no longer probable to result in a liability.

· A provision should be used only for expenditures for which the provision was originally recognised and not against a provision recognised for another purpose, so as not to conceal the impact of two different events.

· Provision should not be recognised for future operating losses, since it is not a liability nor meet the crieteria for provisions.

· A restructuring provision should include only the direct expenditures, necessarily entailed by the restructuring and not associated with the ongoing activities of the enterprise.

· Disclosure

o For each class of provision - the carrying amount at the beginning and end of the period; additional provisions made, amounts used and unused amounts reversed during the period.

o Also for each class of provision – description of the nature of the obligation, the expected timing of any resulting outflows of economic benefits, the uncertainties about those outflows and the amount of any expected reimbursement (also stating the amount of any asset recognised therefor)

o For each class of contingent liability – a brief description of its nature and where practicable, an estimate of its financial effect, the uncertainties relating to any outflow and the possibility of any reimbursement. If the information is not disclosed, being not practicable, the fact thereof is to be disclosed.

In extremely rare cases, disclosure of any information can be expected to prejudice seriously the position of the enterprise in a dispute with other parties; in such cases the information need not be disclosed but,
the fact and reason for such non–disclosure alongwith the general nature of dispute should be disclosed.

Accounting Standard 28 : Impairment of Assets

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:32:00 +0530

Accounting Standard 28 : Impairment of Assets

· Applied in accounting for the impairment of all assets, other than:

o inventories (AS 2);

o assets arising from construction contracts (AS 7);

o financial assets, including investments (AS 13); and

o deferred tax assets (AS 22).

· Recoverable amount is the higher of an asset’s net selling price and its value in use.

· Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

· An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.

· Useful life is either:

o the period of time over which an asset is expected to be used ; or

o the number of production or similar units expected to be obtained from the asset.

· A cash generating unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets.

· Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash generating unit under review and other cash generating units.

· An active market is a market where:

o the items traded are homogeneous;

o willing buyers and sellers can normally be found at any time; and

o prices are available to the public.

o To assess at each balance sheet date any indication, external or internal as given in AS, that an asset may be impaired and estimate the recoverable amount of the asset.

· In measuring value in use:

o cash flow projections should be based on assumptions that represent management’s best estimate of the set of economic conditions that will exist over the remaining useful life of the asset. Greater weight should be given to external evidence;

o cash flow projections should be based on the most recent financial budgets/forecasts (maximum 5 years, unless longer period justified) that have been approved by management.

o cash flow projections beyond the period covered by the most recent budgets/forecasts should be estimated by extrapolating the projections based on the budgets/forecasts using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. This growth rate should not exceed the long-term average growth rate for the products, industries, or country or countries in which the enterprise operates, or for the market in which the asset is used, unless a higher rate can be justified.

· Estimates of future cash flows should include:

o projections of cash inflows from the continuing use of the asset;

o projections of cash outflows that are necessarily incurred to generate the cash inflows from continuing use of the asset (including cash outflows to prepare the asset for use) and that can be directly attributed, or allocated on a reasonable and consistent basis, to the asset; and

o net cash flows, if any, to be received (or paid) for the disposal of the asset at the end of its useful life.

· Future cash flows should be estimated for the asset in its current condition. They should not include estimated future cash inflows or outflows that are expected to arise from:

o a future restructuring to which an enterprise is not yet committed; or

o future capital expenditure that will improve or enhance the asset in excess of its originally assessed standard of performance.

· Estimates of future cash flows should not include:

o cash inflows or outflows from financing activities; or

o income tax receipts or payments.

· The estimate of net cash flows to be received (or paid) for the disposal of an asset at the end of its useful life should be the amount that is expected to be obtained from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the estimated costs of disposal.

· The discount rate should be a pre tax rate that reflect current market assessments of the time value of money and the risks specific to the asset and should not reflect risks for which future cash flow estimates have been adjusted.

· Impairment loss is the reduction in carrying amount of the assets to its recoverable amount.

· An impairment loss should be recognised as an expense in the profit and loss account immediately. Impairment loss of a revalued asset should be treated as a revaluation decrease as per AS 10.

· If the estimated impairment loss is greater than the carrying amount of the asset, recognise a liability if, and only if, required by another AS.

· The depreciation/amortisation charge for the asset should be adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value on a systematic basis over its remaining useful life.

· In case of any indication of impairment, the recoverable amount should be estimated for the individual asset. If it is not possible, determine the recoverable amount of the cash-generating unit to which the asset belongs.

· If an active market exists for the output produced by an asset or a group of assets, the same should be identified as a separate cash-generating unit, even if some or all of the output is used internally. In such case management’s
best estimate for future market price of output should be used:

o in determining the value in use of this cash-generating unit, when estimating the future cash inflows that relate to the internal use of the output; and

o in determining the value in use of other cash-generating units of the reporting enterprise, when estimating the future cash outflows that relate to the internal use of the output.

· Cash-generating units should be identified consistently from period to period for the same asset or types of assets, unless a change is justified.

· The carrying amount of a cash-generating unit should be determined consistently with the way the recoverable amount of the cash-generating unit is determined

· In testing a cash-generating unit for impairment, identify whether goodwill that relates to this unit is recognised in the financial statements. If this is the case, an enterprise should:

o perform a ‘bottom-up’ test.

o if, in the ‘bottom-up’ test, the carrying amount of goodwill could not be allocated on a reasonable and consistent basis to the cash-generating unit under review, the enterprise should also perform a ‘top-down’ test.

· In testing a cash-generating unit for impairment, identify all the corporate assets that relate to the cash-generating unit under review. For each identified corporate asset, apply ‘bottom-up’ test or ‘bottom-up’ and ‘top-down’ test both as required.

· Impairment loss should be recognised for a cash-generating unit if, and only if, its recoverable amount is less than its carrying amount. The impairment loss should be allocated to reduce the carrying amount of the assets of the unit in the following order:

o first, to goodwill allocated to the cash-generating unit (if any); and

o then, to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit.

· These reductions in carrying amounts should be treated as impairment losses on individual assets and recognised either in P & L account or as revaluation decrease as applicable.

· In allocating an impairment loss, the carrying amount of an asset should not be reduced below the highest of:

o its net selling price (if determinable);

o its value in use (if determinable); and

o zero.

· The amount of the impairment loss that would otherwise have been allocated to the asset should be allocated to the other assets of the unit on a pro rata basis.

· A liability should be recognised for any remaining amount of an impairment loss for a cash-generating unit if, required by another AS.

· At each balance sheet date, if there are indications internal or external, that an impairment loss recognised for an asset in prior accounting periods, no longer exists/has decreased, then the recoverable amount of that asset to be estimated. For the same consider the following as minimum indications:

· An impairment loss recognised for an asset in prior accounting periods should be reversed if there is a change in the estimates of cash inflows, cash outflows or discount rates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of the asset should be increased to its recoverable amount.

· The increased carrying amount of an asset due to a reversal of an impairment loss should not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior accounting periods.

· A reversal of an impairment loss for an asset should be recognised as income immediately in profit and loss account. In case of revalued assets, the same should be treated as a revaluation increase as per AS 10.

· After a reversal of an impairment loss, the depreciation (amortisation) charge for the asset should be adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.

· A reversal of an impairment loss for a cash-generating unit should be allocated to increase the carrying amount of the assets of the unit in the following order:

o first, assets other than goodwill on a pro rata basis based on the carrying amount of each asset in the unit; and

o then, to goodwill allocated to the cash-generating unit, if the requirements of reversal of impairment loss of goodwill are met.

· These increases in carrying amounts should be treated as reversals of impairment losses for individual assets and recognised accordingly.

· In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset should not be increased above the lower of:

o its recoverable amount (if determinable); and

o the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior accounting periods.

· The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset should be allocated to the other assets of the unit on a pro-rata basis.

· An impairment loss recognised for goodwill should not be reversed in a subsequent period unless:

o the impairment loss was caused by a specific external event of an exceptional nature that is not expected to recur; and

o subsequent external events have occurred that reverse the effect of that event.

· For each class of assets, the financial statements should disclose:

o the amount of impairment losses recognised in the statement of profit and loss during the period and the line item(s) of the statement of profit and loss in which those impairment losses arae included;

o the amount of reversals of impairment losses recognised in the statement of profit and loss during the period and the line item(s) of the statement of
profit and loss in which those impairment losses are reversed;

o the amount of impairment losses recognised
directly against revaluation surplus during the period; and

o the amount of reversals of impairment losses recognised directly in revaluation surplus during the period.

· An enterprise that applies AS 17, should disclose the following for each reportable segment based on an enterprise’s primary format (as defined in AS 17):

o the amount of impairment losses recognised in the statement of profit and loss and directly against revaluation surplus during the period; and

o the amount of reversals of impairment losses recognised in the statement of profit and loss and directly in revaluation surplus during the period.

o If an impairment loss for an individual asset or a cash-generating unit is recognised or reversed during the period and is material to the financial statements of the reporting enterprise as a whole, an enterprise should disclose;

o the events and circumstances that led to the recognition or reversal of the impairment loss;

· the amount of the impairment loss recognised or reversed;

o for an individual asset:

§ the nature of the asset; and

§ the reportable segment to which the asset belongs, based on the enterprise’s primary format (as per AS 17);

o for a cash-generating unit:

§ a description of the cash-generating unit;

§ the amount of the impairment loss recognised or reversed by class of assets and by reportable segment based on the enterprise’s primary format (as defined in AS 17); and

§ if the aggregation of assets for identifying the cash-generating unit has changed since the previous estimate of the cash-generating unit’s recoverable amount (if any), the enterprise should describe the current and former way of aggregating assets and the reasons for changing the way the cash-generating unit is identified;

· whether the recoverable amount of the asset
(cash-generating unit) is its net selling price or its value in use;

o if recoverable amount is net selling price, the basis used to determine net selling price; and

o if recoverable amount is value in use, the discount rate used in the current estimate and previous estimate (if any) of value in use.

· If impairment losses recognised (reversed) during the period are material in aggregate to the financial statements of the reporting enterprise as a whole, an enterprise should disclose a brief description of the following:

o the main classes of assets affected by impairment losses (reversals of impairment losses) for which no information is disclosed; and

o the main events and circumstances that led to the recognition (reversal) of these impairment losses for which no information is disclosed.

As a transitional provision any impairment loss determined before this standard becomes mandatory should be adjusted against the opening balance of revenue reserve. Impairment losses on revalued assets to be adjusted against balance in revaluation reserve and excess, if any against the opening balance of revenue reserve.

Accounting Standard 27: Financial Reporting of Interests in Joint Ventures

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:32:00 +0530

Accounting Standard 27: Financial Reporting of Interests in Joint Ventures

· A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control.

· In cases, wherein an enterprise by a contractual arrangement establishes joint control over an entity which is a subsidiary (as per AS 21) the entity is to be consolidated under AS 21 and is not to be treated as a joint venture as per this Statement. The other venturer(s) may treat the same as a joint venture. (Limited Revision to AS 27 w.e.f 1-4-2004)

· Joint control is the contractually agreed sharing of control over an economic activity.

· For evaluating joint control, one need to consider whether the contractual arrangement provides protective rights or participating rights to the enterprise. The existence of participating rights would be evidence of joint control. With effect from 1-4-2004 this explanations is removed by Limited Revision to the Standard.

· Control is the power to govern the financial and operating policies of an economic activity so as to obtain benefits from it.

· A venturer is a party to a joint venture and has joint control over that joint venture.

· An investor in a joint venture is a party to a joint venture and does not have joint control over that joint venture.

· Proportionate consolidation is a method of accounting and reporting whereby a venturer’s share of each of the assets, liabilities, income and expenses of a jointly controlled entity is reported as separate line items in the venturer’s financial statements. The venturer's share in the post acquisition reserves of the jointly controlled entity should be shown separately under the relevant reserves in the consolidated financial statements (ASI 28).

· Venturer to recognise in individual and consolidated financial statements its share of assets, liabilities, incomes and expenses in the jointly controlled operations and also in jointly controlled assets.

· In venturer’s separate financial statements any interest in a jointly controlled entity to be accounted as an investment and AS 13 to be followed.

· In a venturer’s consolidated financial statements interest in jointly controlled entity to be reported using proportionate consolidation except

o when interest is acquired and held with a view of disposal in near future to be considered as not more than 12 months from acquisition of relevant investments unless a longer period can be justified on the basis of facts and circumstances (ASI 8)

o when severe long-term restrictions that impair the ability to transfer funds to the venturer exists.

In such cases interest to be accounted as investments as per AS 13.

The venturer’s share in the post acquisition reserves of the jointly controlled entity should be shown separately under the relevant reserves in the consolidated financial statements (ASI-28).

· A venturer to discontinue use of proportionate consolidation from the date

o it ceases to have joint control (may retain interest)

o use of proportionate consolidation is no longer appropriate.

In such cases AS 21 to be followed if venturer becomes parent and in other cases AS 13 and/or AS 23 to be followed.

· Cost in such cases is the venturers’ share in net assets on date of discontinuance of proportionate consolidation as adjusted by any goodwill/capital reserve recognised at the time of acquisition.

· In case of sale of assets by a venturer to the joint venture the venturer should recognise only that portion of gain or loss as attributable to the interests of the other venturers. Full loss to be booked in case of evidence of reduction in the net realisable value of current assets or on impairment loss.

· In case of purchase of assets by a venturer from a joint venture, the venturer should recognise its share of profit only on a resale of the asset to an independent party. Loss to be booked in case of reduction in net realisable value of current asset or impairment loss.

· In case of transactions between venturer and joint venture the above principles to be followed only in consolidated financial statements.

· Investor to follow AS 13, AS 21 and AS 23 as appropriate, for investments in joint ventures.

· Operators/Managers of joint ventures to account for fees as per AS 9.

· A venturer to disclose separately, in respect of the joint venture, contingent liabilities and capital commitments.

· A venturer to disclose list of joint ventures and interests in significant joint ventures.

A venturer to disclose aggregate amounts of each of the assets, liabilities, income and expenses related to its interests in the jointly controlled entities

Accounting Standard 26: Intangible Assets

noreply@blogger.com (Unknown) — Thu, 14 Oct 2010 13:31:00 +0530

Accounting Standard 26: Intangible Assets

· Not applicable to intangibles covered by other AS, financial assets, mineral rights/expenditure on exploration, etc. arising in insurance enterprises from contracts with policy holders and also to expenditure in respect of termination benefits.

· An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. An asset is a resource:

o controlled by an enterprise as a result of past events; and

o from which future economic benefits are expected to flow to the enterprise.

· Useful life is period of time over which an asset is expected to be used or the number of production units expected to be obtained from the asset.

· Impairment loss is the amount by which the carrying amount exceeds its recoverable amount.

· An intangible asset to be recognised only if future economic benefits will flow and the cost of the asset can be measured reliably.

· Probability of future economic benefits to be assessed using reasonable and supportable assumptions.

· An intangible asset should be measured initially at cost.

· Internally generated goodwill, brands, mastheads, publishing titles etc. should not be recognised as an asset.

· No intangible asset arising from research to be recognised and expenditure on research should be recognised as an expense, when incurred.

· An intangible asset arising from development to be recognised, if an enterprise can demonstrate its feasibility to complete, intention and ability to use or sell, generation of future economic benefits, and availability of resources for completion and ability to measure the expenditure.

· Expenditure on an intangible item that cannot be treated as an asset, should be recognised as an expense and treated as goodwill (capital reserve), in case of an amalgamation (AS 14).

· Treatment of expenditure (other than expenditure on VRS) incurred on intangible items, which do not meet the criteria of an 'intangible asset':

o If incurred after the date of AS 26 becoming mandatory – to be expensed out when incurred;

§ The balances of expenditure incurred before the date of AS 26 becoming mandatory and appearing in the balance sheet, should continue to be expensed out over a number of years as originally contemplated;

§ If such balances have been adjusted against the opening balances of revenue reserves as on 1-4-2003, it should be rectified and treated on the above lines.

· Expenditure, on an intangible item recognised as an expense should not form part of cost of an intangible asset at a later date.

· Subsequent expenditure to be added to cost only if is probable that the expenditure will generate future benefits in excess of the original estimates.

· An intangible asset should be carried at its cost less any accumulated amortisation and any accumulated impairment loses.

· An intangible asset should be amortised over its useful life on a systematic basis, to reflect the pattern in which the economic benefits are consumed or if the pattern cannot be determined reliably, on the straightline method.

· There is a rebuttable presumption for useful life of an intangible asset – not exceeding ten years from the date it is available for use. In case of intangible assets in form of legal rights, the useful life is not to exceed the period of the legal rights, unless renewable, which is virtually certain.

· Residual value to be taken as zero unless a commitment to purchase the asset or an active market exists.

· The amortisation period and method to be reviewed at each financial year end and any change to be accounted for as per
AS 5.

· Any impairment losses to be recognised.

· The recoverable amount of each intangible asset to be estimated at each year end in case of an intangible asset which is not yet available for use and one which is amortised over a period exceeding ten years.

· An intangible asset to be derecognised on disposal or when no future economic benefits are expected from its use and gain or loss recognised.

· Disclosure for each class of intangibles, their useful lives, amortisation rate, amount and method, carrying amount (gross and net), any additions, retirements, impairment losses recognised or reversed and any other change.

· In case of useful life of an intangible asset exceeding ten years, proper disclosure of the reasons for the same should be given.

· Research and Development expenditure recognised as expense to be disclosed.

On standard being applicable, adjustment to any intangible asset as required to be made with a corresponding adjustment to the opening revenue reserves.