The IUP Journal of Accounting Research and Audit Practices
Focus
Measuring the performance and valuing the firms has been a challenging task for
many analysts over decades. The information dissemination processes and the
technology have changed the game of valuation. Further, the challenge in valuing the firms – Intellectual Capital (IC) and intangible assets form part of valuing the firm irrespective of the size of the firm. Intangibles can impact the future cash flows of the firm and ability to build on IC further can impact heavily on the growth of the firm leading to huge impact of the future cash flows, particularly in the knowledge economies. Intangible assets form major part of the total value of the firm in many cases and are very vital in deciding upon investments for many investors. Balance Scorecard (BSC) could be one of the tools, designed to take a ‘balanced view’ on internal performance measurement and intangibles. “Is the Balanced Scorecard Appropriate to Measure Intangible Resources?”, by Stefania Veltri is the paper which addresses the issue of appropriateness of the tool BSC in the current context with reference to valuing the intangibles. The author observes that the usage of BSC model in measuring intangibles is like using outdated tools to measure innovative factors as the BSC approach concentrates on the role of intangible assets in the strategic planning, whereas the IC approach stresses on relevance of the same on creation of value and on the inter-linkage of assets in building the value of the firm.
Accounting and disclosure requirements have been issued in the interest of stakeholders across the world by the respective regulatory bodies. With the issuance of Accounting Standard (AS)-17 the interest of stakeholders in terms of understanding divisional performance and financial status is facilitated which is known as Segment Reporting. AS-17 prescribed by the Institute of Chartered Accountants of India (ICAI) from April 2001 mandates preparation of accounts on the basis of segments to the stakeholders enabling them have an improved possibility of evaluating division-wise performance. The study titled “Segment Reporting Practices in Indian IT Companies”, by Raju L Hyderabad and P B Kalyanshetti investigates segmental reporting practices of IT companies in view of their changing customer profile and geographical existence and reveals that IT companies are not able to provide segmental information up to the expected mark. Very small percentage of the firms complies with the mandatory disclosure norms including companies like Infosys and Wipro. The authors stress on the plugging of poor disclosure of mandatory information needs as per AS-17 and observes that the standard needs to be amended to enable better disclosure practices.
The issue and concern of corporate governance has become a very critical area with continuous saga of corporate failures such as Enron, WorldCom and Cendant on international arena and Satyam Inc. The incidences across the world are enough evidences of failures of corporate governances at all levels including the accounting and audit committees. The role of audit committees as a common mechanism of implementing corporate governance has become the most significant development during the last two decades across the globe. This gave way to various acts and reports such as SOX act, Blue Ribbon Committee’s (BRC) report and Narayana Murthy Committee’s report that stresses on strengthening the functions of these committees to begin with giving greater independence to audit committees. On these lines the study titled “Audit Committees and Corporate Governance: A Study of Select Companies Listed in the Indian Bourses”, by M D Saibaba and Valeed Ahmad Ansari concentrates on examining the relationship between the independence of the audit committee, board independence and firm performance of listed firms. The authors observe that the relationship between Audit Committee Index (ACI) and firm values is positive and significant in the Indian context.
Employees are seen as an increasingly important factor in handling the future market uncertainties and minimizing the organizations’ potential downturns. For this purpose the study titled “Ratio Analysis Approach on Quality of Employees”, by Samuel P D Anantadjaya measures the quality of employees only on basis of employees’ skills and abilities, and the ratio analyses are also limited to growth ratios (sales growth, net profit growth and cost reduction). It is expected that the higher the quality of employees, the higher the growth ratios of any given firm. A cluster sampling method is used in this study to note the characteristics of small enterprises in certain locations. Apart from the qualitative analyses, which are based on interviews and field observations, a combination of statistical software packages is used as a tool towards performing quantitative analysis. The author observes that quality of employees’ statistically significant impact is found on the growth ratios.
In yet another research work titled “Accounting Earning, Book Value and Cash Flow in Equity Valuation: An Empirical Study on CNX NIFTY Companies”, by Santanu K Ganguli tests the empirical validity of Ohlson and Feltham-Ohlson models as to how the accounting variables, namely abnormal earning, Book Value (BV) and operating cash flow are related over a period and their respective role in equity valuation in Indian scenario. The author in this study observes that abnormal earning, BV and operating cash flow component of earning respectively follow an autoregressive process. The findings suggest that next accounting period’s abnormal earnings can be predicted on the basis of information on the current abnormal earning and BV of the equity. The author further argues that there is no significant difference in the findings when operating cash flow variable is added to abnormal earning and BV and concludes that abnormal earning and BV are sufficient in predicting market value as the operating cash flow variable is not adding any relevance in the study.
Automated Teller Machines (ATMs): The Changing Face of Banking in India
Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.
The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario
If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.
Indian Scenario
The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.
