Coal India Limited – An interesting story

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February 9, 2012

In a recent story carried out in Business Standard about Coal India Ltd resurrection and turnaround there has been revelation of some of the techniques used by the company. A daunting task of keeping
the company’s book in green has been made over several years. The mining giant has posted 68% increase in the profit for half year ended September 2011. We at Takshila try to understand how a company which is a PSU (A Maharatna enterprise) turned its
fortunes around in a matter of few years. Though the author in the article establishes three primary
reasons to Coal India’s success story viz:
• E-Auction
• Interest from Bank Account Deposits
• Reducing Head Count
Lack of Competition
There’s more than what meets the eye in this case. Is financial engineering really at the helm of its success story? A senior faculty at Takshila points out “This story clearly highlights the advantage of being in a monopolistic business. PSU(s) in India will continue to stay profitable till the time they don’t face competition. This is clearly pointed out by the situation Air India, BSNL, MTNL or ITI is in today. They were highly profitable companies till the time the market was not open to private sector, today they are nowhere to be seen.
In Coal India case, this is clearly indicated, they are able to make huge money by e – auction since there is no competition and demand of coal is such that it’s commanding that premium price. But this is not the way to improve company’s health. They need to look at selling off huge stocks of coal in their stores at the earliest and also they need to look towards increasing efficiency plus increasing production. This is a tough problem for a PSU to crack and that’s the reason as soon as competition hits the door, they will be first to fold”
Technology and Outsourcing
“This is an amazing story highlighting what technology can do to businesses. E-auction brings in huge amount of transparency into transactions and brings down inefficiencies in a tremendous way. Besides that, outsourcing deals bring in efficiency at the operational fronts. Still the company’s comment is that stocks are getting piled up because of evacuation inefficiency which is why they do not want to increase coal production further” said a senior faculty at Takshila.

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The CA Institute on Black Money and Reforms

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February 6, 2012

In a recent announcement, the Institute of Chartered Accountants of India (ICAI)
has said that it will be submitting the report on Indian black money stashed overseas
within a fortnight. The Finance Ministry had earlier asked the Institute to constitute a
committee which will investigate on ways to bring back the black money overseas, as
well as prevent such practices.

In addition to this, the president of the Institute said that there was a strong need to
form laws that would force citizens to declare their assets overseas ­­– “Such a law will
help bring out details of black money reserves. We have also suggested that those who
declared their assets and pay the taxes be given concessions on the penalty.”

He also talked about brining in uniform accounting standards for educational
institutions in the country, thereby increasing transparency and regulation. The HRD
ministry has already given a green signal to this, and the matter will be considered in
more detail at the next conference of education ministers. The new plan will be rolled
out in different phases, and will implement the accounting standards released by the
Institute. Mr G. Ramaswamy said, “In the first phase, all higher education institutions
registered with bodies such as the AICTE will be trained in the new format of financial
reporting.”

The issue of black money received nation­wide attention recently, and it’s certainly good
to see the CA Institute working towards curbing it. Let’s hope these new changes and
reforms are implemented soon enough!

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IFRS 10, 11 and 12

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January 31, 2012

Interaction between IFRS 10, 11, 12 and IAS 28 presented in nutshell through a simple flow chart.

Interaction between IFRS10-11-12

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PwC says India must have a separate regulating body

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January 30, 2012

In a recent development, PricewaterhouseCoopers, one of the largest accountancy
firms in the world, said that it was high time India thought about setting up a separate
regulatory body for the auditors. Currently, the Institute of Chartered Accountants
of India (ICAI) fulfills this role, and also functions as the body granting licenses to
auditors. PwC did mention the CA institute in the statement, praising it for the crucial
role it was playing so well, but pointed out to the general practice among the other
nations, especially the US, where the regulator of auditors is different from the institute
that grants licenses.
The statement was released in tandem with the original demand by SEBI, the market
regulator in India. SEBI has made prior efforts also in this direction, highlighting its
concern over the urgent need for a strong and powerful authority to watch over the
auditors. The PwC India chairman, Deepak Kapoor, said, “It’s a great suggestion on
the SEBI’s part, but the decision has to be taken by the government, including by the
Corporate Affairs Ministry and the Finance Ministry. There has to be a political will and
then we can emulate the global example . . .”
The issue of having a separate regulator captured the nation’s attention after the major
accounting fraud in the case of Satyam Computers. The country’s image does take a dent
overseas when such events are seen along with the dire need of a separate regulator, as
well as the continuing row over adoption of the IFRS standards.
Takshila would like to learn your views on this. Do you think we need a separate
regulator or is the CA Institute doing a good enough job? How do you think this will
impact the accounting profession in the country?

In a recent development, PricewaterhouseCoopers, one of the largest accountancyfirms in the world, said that it was high time India thought about setting up a separateregulatory body for the auditors. Currently, the Institute of Chartered Accountantsof India (ICAI) fulfills this role, and also functions as the body granting licenses toauditors. PwC did mention the CA institute in the statement, praising it for the crucialrole it was playing so well, but pointed out to the general practice among the othernations, especially the US, where the regulator of auditors is different from the institutethat grants licenses.
The statement was released in tandem with the original demand by SEBI, the marketregulator in India. SEBI has made prior efforts also in this direction, highlighting itsconcern over the urgent need for a strong and powerful authority to watch over theauditors. The PwC India chairman, Deepak Kapoor, said, “It’s a great suggestion onthe SEBI’s part, but the decision has to be taken by the government, including by theCorporate Affairs Ministry and the Finance Ministry. There has to be a political will andthen we can emulate the global example . . .”
The issue of having a separate regulator captured the nation’s attention after the majoraccounting fraud in the case of Satyam Computers. The country’s image does take a dentoverseas when such events are seen along with the dire need of a separate regulator, aswell as the continuing row over adoption of the IFRS standards.
Takshila would like to learn your views on this. Do you think we need a separateregulator or is the CA Institute doing a good enough job? How do you think this willimpact the accounting profession in the country?

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Disclosure and Verification of Answer Books by CA Institute

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January 19, 2012

CA Institute Logo

In a long-pending and important development, the CA Institute has released guidelines for students to have their exam answer sheets disclosed and verified. The case was originally stayed by the Delhi High Court, but in a recent ruling, the Supreme Court classed it as covered under the Right to Information Act. This comes as good news for students who may feel their answer sheets were not properly evaluated.

The procedures for disclosure and verification are different: Whereas in the former, the student gets to see the evaluated copy of the answer sheet in person, the latter ensures that marks are awarded for all attempted questions, and that there is no totaling error. The fee required is Rs 100 per paper for CA Final & IPCC, while it’s a flat Rs 200 for CPT.

Finally, the students are also entitled to have access to the instructions issued by the CA Institute to the examiners.

Read the original announcement by the CA Institute here.

However, the important point to be noted is that the Institute reserves the right to reject an application is it feels the presence of a malevolent intent. At the same time, the copies of answer sheet can’t be shown to any third party except for the student.

Do you think this development will help make the exam process better? Or should we have had faith in the Institute and trust its final decision? Let us know what you think about this.

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