COVER STORY
Creative Accounting
-- Rahul Banthia and Somesh Satnalika
Accounting forms the basis for determining the health of an organization. In this article, we examine how accounting is more than just a back end function. We look at Tata Motors to understand how companies are adopting financial engineering to restructure their balance sheets and thereby increasing their profitability. We examine how such `creative' accounting can help generate value for the companies. Finally, we examine the extent of such practices in the Indian context.
© 2010 IUP. All Rights Reserved.
ACCOUNTING STANDARDS
Profits in Crisis Times: The Fallacy of FAS 159
-- Jyoti Paul and Rajeshwari Malik
When the world economy is paralyzed by the global credit crisis, the mention of the word `profit' by any organization triggers a series of questions regarding the authenticity of such profits and the reasons for the same. Accounting fiction is one such reason for these massive profits. Financial Accounting Standard (FAS) 159 has been used by the organizations to their tune to arrive at such profits in the first quarter of 2009. The Fair Value Option (FVO) established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. This article studies the impact of accounting standard`s FVO and how it has contributed to such profits. It focuses on FAS 159 in detail and how this friendly accounting rule is of great help in crisis times.
© 2010 IUP. All Rights Reserved.
ACCOUNTING STANDARDS
IFRS and Indian Accounting Standards: A Comparative Analysis
-- Rupali S Ambadkar
The accounting world is abuzz with the phrase, "Convergence with International Financial Reporting Standards (IFRS)". IFRS is being accepted as a universal financial reporting language by the corporate world and will be adopted for all public interest entities in India by April 1, 2011. For achieving this goal of convergence, there is a need to identify the key differences between Indian Accounting Standards and IFRS. This article attempts to make a comparative analysis between IFRS and IAS, highlighting areas of major differences which need immediate attention for successful convergence.
© 2010 IUP. All Rights Reserved.
BUSINESS ENVIRONMENT
More than a Legacy
-- Robert Gagnon
The accounting profession provides many opportunities for role models and mentors to leave their imprint on others. A study was conducted on the skill sets as well as on the integrity of the accounting professionals. It was found that the most important competencies tend to be soft skills such as personal integrity and ethics, critical thinking, communication, presentation skills, strategic thinking, decision making and leadership. The article also examined how these skills are acquired and, in addition to the more obvious formal education and practical experience factors, mentoring was also considered as a significant influence.
© 2009 CAMagazine. Originally published in www.CAmagazine.com, September 2009. Reprinted with permission.
COSTING
Cost Concept Analysis in Indian Corporate Scenario
-- Kirti Ranjan Swain
The changing trend in India's corporate scenario indicates the growing consolidation through mergers and acquisitions. Corporate bigwigs are coming together for mutual benefit and to have a larger chunk of the market. The empirical studies of capital structure focus on cost analysis because financing decision plays a major role in the growth and survival of business in the corporate world. A number of factors which influence financing decisions, including entrepreneurs' prior experiences in capital structure, business goals, business life cycle issues, preferred ownership structures, debt-equity ratios, short vs. long-term debt, sources of funding for growth, attitudes toward debt financing, etc., takes more risk towards financing. Changes in the economic and political environment, social attitudes and technological developments have shifted the primary focus of the Indian industry from asset and resource development to asset and resource management. Proper planning of composition is sine qua non for sound financial management, since the debt-equity mix or financial leverage has implications for the shareholders' earnings and risk, which, in turn, will affect the cost of capital and the market value of the firm.
© 2010 IUP. All Rights Reserved.
FINANCIAL REPORTING
Green Accounting: Reshaping National Income Accounting System
-- Ashok Panigrahi
The System of National Accounts (SNA), as defined by the United Nations and used internationally, has been subjected to severe criticism that it ignores the value of resources (on and in the ground), as well as the value of environmental degradation. Very often, policy makers either ignore or destroy the environment, in the name of economic development. The concept of Green Accounting, which has been developed to address the above shortcoming of the traditional national accounting, is based on the principle that, a proper assessment of a country's income and wealth needs to account for the contributions of activities made by all sectors of the economy and their impact on resource depletion and degradation. Despite a number of difficulties and controversies, there seems to be a growing interest in modifying national income accounting systems to promote understanding of the links between the economy and the environment. This article focuses on the initiatives taken to modify or reshape the national accounting system.
© 2010 IUP. All Rights Reserved.
HUMAN RESOURCE ACCOUNTING
Emerging Dimensions in Human Resource Accounting
-- A Vinayagamoorthy and P Baby
An enterprise possesses two types of resources, (i.e., assets) - a group of human resources and a group of physical resources such as plant and machinery, land and building, furniture, etc. In fact, human resource is the most important factor in securing stability, development, and profitability of an enterprise, either in the short run or in the long run. The traditional accounting system provides information only regarding physical resources. The human resources are not reflected in the financial statements as assets in this system. Accountants have not yet been able to evolve a `generally accepted system' as regards the representation of the `value' of these resources through financial statements. Such a limitation of the traditional accounting system has led to the development of a new field of accounting, which is known as `Human Resource Accounting' (HRA). With the accelerated growth in science and technology, the value of human capital is gradually increasing. Hence, it is essential for a company to reflect the investment in human resources.
© 2010 IUP. All Rights Reserved.
SPEECH
Speech by SEC Commissioner: Hedge Fund Regulation on the Horizon - Don't Shoot the Messenger
-- Luis A Aguilar Commissioner,US Securities and Exchange Commission, New York.
The hedge fund industry looks very different today from where it had started. There has been much speculation about the impact of hedge fund on the capital markets. Also, there are certain questions about whether hedge funds have contributed to the market turmoil and are also responsible for the demise of Lehman Brothers as well as others. Nobody is certain as to whether the lack of oversight of the industry resulted in the large amount of risk through the use of short sales and derivatives such as credit default swaps.
© 2009 US Securities and Exchange Commission (www.sec.gov). Speech by Luis A Aguilar, Commissioner, US Securities and Exchange Commission, Conference Co-sponsored by Third Annual Fraud and Forensic Accounting Education Conference, Atlanta, Georgia, May 28, 2009. Reprinted with permission. |
