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COVER
STORY
ESO
Accounting : Emerging Issues and Trends
-- Pankaj M Madhani
Accounting
for Employee Stock Options (ESOs) has been one of the most
controversial topics in financial reporting during the last
decade. Many employees receive equity compensation as a supplement
to their salaries. Traditionally, this compensation comes
in the form of ESO grants. This article describes employee
stock option mechanism and underlines the rationale for ESO
grants. It also explains how ESOs differ from ordinary call
options. In recent years, accounting scandals (e.g., Enron,
Tyco and WorldCom) created an environment that demanded more
transparent and higher quality financial reporting. Subsequently
ESO grants and accounting methods came under increased scrutiny
by regulators.
© 2007 IUP . All Rights Reserved
AUDITING
Empowering
Auditors
-- Shann Turnbull
Auditors are not independent like judges in a court of
law because they are engaged and remunerated by directors
of companies whose accounts they judge. To empower auditors
to be independent like judges, auditors need to convince public
companies to change their constitutions to create a shareholder
panel elected on a one-vote-per-member basis to engage and
remunerate the auditor. Auditors will then be empowered to
protect the minority shareholders.
© 2007 Shann Turnbull. All Rights Reserved.
COST
ACCOUNTING
ABC
of Activity-Based Costing
-- Vikas Shrotriya
Activity-Based Costing (ABC) has proved superior to the
Traditional Costing System (TCS). The operational span of
the manufacturing as well as trading of economic entities
has increased manifold. Dynamically changing technological
environment, need for focused specialization, incessantly
increasing degree of competition, the threat of substitution
and many such factors have forced the management to become
environmentally conscious and strategically proactive. ABC
is a method of tracing costs of activities and then products
or services. It is generally used as a tool for strategic
planning and control. This article discusses some aspects
of ABC.
© 2007 IUP . All Rights Reserved
FINANCIAL
REPORTING
Segment
Reporting by Banks
-- Sanjiv Agarwal
Segment reporting is one of the important disclosures
based on segmentation. The RBI has issued a set of new guidelines
in April, 2007 to provide better and objective disclosure
standards for segment reporting in banks. Unlike AS-17 norms,
Indian banks are now required to disclose five business segments-treasury,
corporate/wholesale banking, retail banking, other business
operations and residual operations w.e.f. March, 2008. While
we have guidelines now in place, the objective will be achieved
only when bank managements are proactive in information disclosure,
which will result in better corporate disclosure.
© 2007 IUP . All Rights Reserved
BUDGET
Budget
2007 : A Bird's Eye View
-- SB Kamashetty
In the month of February 2007, the budget was introduced
by P Chidambaram, the 29th Finance Minister of India. The
main features like those of earlier ones have both positive
and negative points. The tax rates for domestic and foreign
companies have been maintained at the existing level of 30
to 40% respectively, but the dividend distribution tax has
been hiked from 12.5 to 15%. The budget proposed to remove
the surcharge on firms and companies if taxable income is
Rs. 1 cr or less. This article discusses all the issues of
this current budget.
© 2007 IUP . All Rights Reserved
BUSINESS
ENVIRONMENT
Balanced
Scorecard in Public Sector Banks
-- Debkumar Mukherjee
Although public sector banks had formulated and achieved
the management strategic goals, there remain certain loopholes
that restrict the growth in the long-term perspective. Hence,
there is the need for identifying the critical success factors
and prioritizing the same in line with the strategic goal.
The matrix of balanced scorecard will form the foundation
of the new type of performance measurement and ongoing improvement.
The balanced scorecard model is suggested for public sector
banks to face the real challenge in the potential market.
This model is not a new invention, but it is a refined form
of traditional performance measurement system.
© 2007 IUP . All Rights Reserved
BUSINESS
ENVIRONMENT
Achieving
Operational Best Practice in a Corporate Treasury
-- Patrick Coleman
While
banking has well-established best practice procedures for
treasury, the same could not be always said for corporates.
This article explores best practice principles that could
be achievable for most corporates.
© 2007 Patrick Coleman. This article was originally published
on www.gtnews.com. Reprinted with permission.
CORPORATE
GOVERNANCE
Corporate
Governance : Compliance Report
-- Naresh Kumar
Corporate
governance has assumed vital importance in the wake of increasing
competition and globalization. In the emerging scenario of
globalization, a uniform accounting and reporting standard
is needed from the Ministry of Corporate Affairs and the regulator,
Securities and Exchange Board of India (Sebi). As it stipulates
parameters of accountability, control and reporting functions
of the board of directors, it also encompasses proper relationship
among various participants-the board, management, shareholders,
banks, other financial institutions, suppliers, creditors
and the state in determining the direction and performance
of companies.
© 2007 IUP . All Rights Reserved
TECHNOLOGY
New
Rewards, New Risks : Mitigating SOA Risks at the Network Layer
-- Sonia Luna, Steven Wastie and Hugh Taylor
Although
highly effective, Service-Oriented Architectures (SOAs) can
increase an organization's number of network security risks.
Understanding the different risks an SOA will enable internal
auditors to help organizations mitigate vulnerabilities while
taking advantage of this integrated Web services approach.
© 2007 Sonia Luna, Steven Wastie and Hugh Taylor. Originally
published in ITAudit, Vol. 10, April 10, 2007, published by
The Institute of Internal Auditors Inc., www.theiia.org/itaudit.
Reprinted with permission.
SPEECH
Speech
by SEC Staff : Seeing Down the Road: IFRS and the US Capital
Markets
-- John W White
As per Securities Exchange Commission's (SEC's) rules,
foreign private issuers may file their financial statements
in the US using their home country's Generally Accepted Accounting
Principles (GAAP) or using International Financial Reporting
Standards (IFRS). Don Nicolaisen, Chief Accountant of SEC,
laid out a "roadmap" in which the issuers file their financial
statements using IFRS as broadcasted by the International
Accounting Standards Board (IASB). Nicolaisen explains the
highlights of roadmap, including the convergence process between
IFRS and US GAAP.
© 2007 US Securities and Exchange Commission (www.sec.gov).
Speech by John W White, Director, Division of Corporation
Finance, US Securities and Exchange Commission, delivered
at NYSE/Brooklyn Law School, Breakfast Roundtable, New York,
March 23, 2007. Reprinted with permission.
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