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Another day in ICWA Institute - This time on IFRS

Last Monday I gave a presentation to the members of ICWAI - Bangalore Chapter, on how to go about the IFRS implementation. This was arranged as a Professional Development meeting.

I was really thrilled by the following:
  • The Institute president Shri.G.N.Venkatraman presided over the session
  • There turnout was really good. Nice to see many members interested in the topic.
We were informed that Shri.GNV was on board of NACAS and the Institute is actively working on the IFRS.

Shri.GNV gave an update on the latest happenings in the Institute. He invited the members to be more participative in the IFRS journey and the professional development. Shri.GNV already set the context of IFRS implementation in India, which made my job easier, as I could directly jump to my slides, without spending too much time on what the IFRS is all about.
I decided, in the interest of time, to present the slides and then take the Q&A at the end. I have seen in many meetings, small questions drag the time and finally important discussion points will be missed out or just being rushed (or just read by the presenter).

I covered the presentation covering the following areas:
  • What is IFRS
  • What is the current scenario in the countries already implemented
  • What is the scene in india
  • How to plan the transition
  • Challenges
  • The opportunities for the preofession
The presentation was well received and appreciated. There were lot of good questions, which I answered to my best and to the satisfaction of the person asking the question.

It was a good session and I really enjoyed. My friends, Satish and Raghavan was with me during the session.

Not only I got 1 CEP credit hour, but got a lot of satisfaction that I ignited the minds to get into IFRS soon.

Cheers,
Gopal
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CFO Forum on IFRS....organised by CII & EY

Today I attended the CFO Forum on IFRS, with a focus on Technology, Real Estate & Manufacturing.

Jayaram, Convenor - CII, Karnataka, gave the welcome address.

The speakers were the experts in the area. Yes, we had
  • Ruth (Global IFRS Leader of EY and a member of the IFRIC).
  • Dolphy (IFRS Leader, India EY)
  • Harriet (IFRS expert)
  • Kaustav & Navin (EY Partners & IFRS experts)
We had the opportnity of listening to Ruth, who is an IFRIC member representing EY on the global experience.

Dolphy took us through the transition plan in India

Kaustav & Navin took us through the sector specific issues and covered, Technology, Real Estate & Manufacturing.

After this we had a panel discussion, where the CFO of well known companies from the Real Estate (Shobha), Infrastructure (GMR), Engineering (ABB), Techonology (HP) were present.

It was a good knowlege sharing session, which ended with a conculding remarks from Sunil of EY.

Since we were nearing the deadline of implementation of IFRS, we had some good insight to the subject and learning.

Some key learning:
  • IFRS implementation is sure. No postponement
  • Relevant changes to Companies Act, will be made to take care of the financial reporting
  • Tax implications, still a grey area
  • US is committed to move to IFRS.
  • India will be adopting the IFRS, as it is and no changes / tinkering.
  • CA Institute and MCA is working towards the smooth implementation.
I would request all accountants to get prepared for the IFRS, learn it (First unlearn the existing standards) and make use of the situation (the demand for the IFRS experts).

Cheers,
Gopal
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Change your vision - A nice story

There was a millionaire who was bothered by severe eye pain. He consulted so many physicians and was getting his treatment done. He did not stop consulting galaxy of medical experts; he consumed heavy loads of drugs and underwent hundreds of injections.

But the ache persisted with great vigour than before. At last a monk who has supposed to be an expert in treating such patients was called for by the millionaire. The monk understood his problem and said that for sometime he should concentrate only on green colours and not to fall his eyes on any other colours.

The millionaire got together a group of painters and purchased barrels of green color and directed that every object his eye was likely to fall to be painted in green colour just as the monk had directed.

When the monk came to visit him after few days, the millionaire's servants ran with buckets of green paints and poured on him since he was in red dress, lest their master not see any other colour and his eye ache would come back.

Hearing this monk laughed said "If only you had purchased a pair of green spectacles, worth just a few rupees, you could have saved these walls and trees and pots and all other articles and also could have saved a large share of his fortune. You cannot paint the world green." 

Let us change our vision and the world will appear accordingly. It is foolish to shape the world, let us shape ourselves first.
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Union Budget 2010 - A discussion session @ XIME

This year also, I was fortunate to be the chairman of the panel for discussing the Union Budget. It was a tough job this time, as there were not much change in the Union Budget and not many new schemes introduced by the Finance Minister.

Myself and Sendil (my friend) reached the venue much earlier (thanks to the new Flyover)!

We met Prof.Philip, the President of the Institute and he hosted us. Prof. J. Philip,  recently received the Life-time Achievement Award for Excellence in the Profession and Societal Contribution, instituted by the Alumni Association of XLRI, Jamshedpur. Prof. J. Philip was a student of XLRI during 1958-60. Shri B. Muthuraman, Chairman XLRI and Vice Chairman Tata Steel presented the award in a ceremony to mark the Diamond Jubilee Celebrations of XLRI on 21st November, 2009 at Jamshedpur.

Prof.Srinivasan joined us, took us to Mr.Tyagaraj (Officiating Director of XIME) and introduced him.

The other panelist, Mr.Shiva Kumar, CFO, DBOI Global Services P Ltd, who is my friend, joined us and we chatted for sometime, before being put before the gathered knowledge crowd.

It was nice to note that the programme started exactly at the stated time.

After a brief introduction of the panelist, the Management students presented nicely the synopsis of the Union Budget from the angle of Business, Taxpayer, Investor etc., It is really good to see students getting too much into the Budgets and analyzing them too. They put the points very neatly & crisply.

Then Shiva Kumar presented his views on the Union Budget from an Industry perspective. He touched upon the various provisions relating to the Direct & Indirect taxes. His covered the following among other things:
  • TDS provisions - payment before filing the return.
  • Taxability of the LLP Conversion
  • Weighted deduction for inhouse R&D
  • Service Tax
  • GST & DTC roll outs
After Shiva's speech, Prof Srinivasan took the stage and had the entire auditorium under his control with his witty and thought provoking speech. His vast knowledge came in very handy for him. This is the same person, who told the "horse can fly" story while discussing the last union budget. He summarized the speech and concluded "It is not the OUTLAY that matters, but the OUTCOME"!

It was my turn to summarize the session and give my view on the Union Budget. It was a difficult job for me. Yes...the Union Budget has not made any great changes to discuss and whatever little changes that were made, were already covered by the previous speakers.

As usual, I started with a cartoon (pictures can convey better than words) and covered the following:
  • Budget outlay and the highlights of the budget
  • Some of the key projects (for Justice, Development of skilled labours and E-Governance)
  • Direct & Indirect tax changes (mostly covered in my previous post)
  • Challenges before the Government
After my speech, the Q&A session was opened. There were very good questions (of course, questions are always good - only the answers matter). The questions were on:
  • LLP
  • NREGA & how the outlays are utilised
  • MAT implication once the DTC is introduced
We tried to answer the questions. Remember, answering a student is not an easy task!

After the vote of thanks, we left thanking Prof.Srinivasan & Mr.Tyagaraj.

I am really happy that students / B-School are taking initiatives in getting the industry perspective and get the people from Industry to air their views.

Thanks to Sendil for taking the snaps and accompanying me.

Cheers,
Gopal
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Gratuity ceiling increased

This was one of the things, we were expecting in the Budget. But now the cabinet has given their approval for amending the ceiling on Gratuity from Rs.3.5 Lac to Rs.10 Lac on Thursday (4th Mar 2010). However, we need to wait and see whether the tax exemption limit will also get increased.

Below is the extract from the Financial Expresss

The Cabinet on Thursday approved an amendment to the Gratuity Act to raise the ceiling from Rs 3.5 lakh to Rs 10 lakh. The Bill to amend the Act will now go to Parliament, a government official told FE.

Every salaried person, who has completed five years of government or private sector service, is eligible for half a month’s salary as gratuity for every completed year of service. 

But the gratuity pay of those with higher salaries is now limited at Rs 3.5 lakh. The proposed amendment raises this to Rs 10 lakh

Every employer with more than ten salaried workers is mandated to provide gratuity to the eligible employees. Many companies, however, do not keep the gratuity liability adequately funded. That is, they make provisions for future payment, but do not set aside funds towards the future payment. Listed companies are expected to disclose their gratuity liability. 

Source : The Financial Express.

Cheers,
Gopal
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Brouhaha over hike in Fuel price

Find below, one of my friends letter to the editors. Soon, you may see in the newspapers.
 
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Budget 2010 - Hightlights

Pranab has delivered the budget in the expected lines. What the poor finance minister can do in this situation. The prime concern is the fiscal deficit and inflation. He did a good job in the budget by not making too many changes.
Individuals are happy, as they have some excess funds at their disposal.

Let us look at the highlights of the Union Budget 2010:

Plan outlay

Total Receipts          -   7,27,341`
Total Expenditure     - 11,08,749
Fiscal Deficit            -   3,81,408


The Fiscal Deficit is 5.5% of the GDP (Last year it was 6.8%). It is a good sign. We need to wait and see the FY10 result and see whether the 5.5% is achievable.

The targets for the Fiscal Deficit (as a % of GDP) is pegged at 4.8% and 4.1% respectively for 2011-12 & 2012-13.

Taxation

The most awaited agend in all the ITES sector was extending the STPI tax exemption. Pranab has kept his words on rolling back the stimuli. He didn't extend the tax benefit. In a way it is good. But some of the small organisations thrive on this tax benefit and soon they will look for buyers. Time for the ITES market to consolidate.

He has given the assurance & commitment to the introduction of Direct Tax Code and GST from 1-Apr-2010. Let us see.

Business impact

Direct Tax
  • STPI & EOUs taking tax benefit u/s 10A and 10B not extended and get over by 31-Mar-2011.
  • MAT rate has been increased to 18% from 15%. More credit available for the STPI units in the years to come.
  • Encouragement to inhouse R&D by way of higher weighted  deduction.
  • No change to the Corporate tax. But the surcharge for the domestic companies reduced to 7.5% from 10%.
  • Tax benefit for SEZ had some ambiguity with the formula for computing the deduction u/s 10AA. This is clarified and the revised formula is now applicable with retrospective effect from 1-Apr-2006.
  • Tax audit limit increase to Rs.60 lacs (from Rs.40 lacs) for business and Rs.15 lacs for professionals.
  • The turnover for presumptive taxation of small business increased to Rs.60 lacs
Indirect Tax
  • The peak excise duty increased to 10% from 8%. This is in line with the roll back of the stimulus package.
  • The CST rate is unchanged at 2%
  • Service Tax rate remains at 10% (in line with the GST roll out)
  • Service Tax refund provisions simplified for exporters.
Individuals
  • Not much change and only favourable budget.
  • Petrol & Diesel to be costlier by Re.1 per litre due to the increase in the excise duty
  • The tax brackets widened to benefit the individual
    • Upto Rs.160,000               - No Tax
    • Rs.160,000 to Rs.500,000  - 10%
    • Rs.500,000 to Rs.800,000  - 20% 
    • Rs.800,000 & above          - 30%
  • Increased deduction u/s 80CCF. Additional deduction of Rs.20,000 for investment in Infrastructure bonds. So, we get a total deduction on Rs.120,000.
  • "Swavalamban" - a initiative for National Pension Scheme. Under this, Rs.1000 p.a. will be contributed by the Govt. to each NPS account opened in the year 2010-11.
  • SARAL - II : Simplified form for individual salaried class.
There are other schemes that are announced by the PM, which are of national interest. Of which the following are of interest to a common man:
  • Setting up of National Mission for Delivery of Justice & Legal Reforms. This aims to reduce the legal backlog in courts from 15 yrs to 3 yrs by the year 2012.
  • National Skill Development Corporation approved 3 projects for Rs.45 crore to create 10 lac skilled manpower at the rate of 1 lac per year.
  • Technology Advisory Group for Unique Projects to be set up to look into the technological & systemic issues for effective tax administration and financial governance.
Going back to the earlier budget, he proposed the following 2 things in the Tax proposals.
  1. Direct Tax Code - Draft of DTC within 45 days, which he achieved.
  2. Safe Harbour Rules (for transfer pricing declaration) for transactions between associated parties. No threshold nor rules were laid down so far.
Challenges
  • Bringing back the economy and reduce the fiscal deficit
  • Control inflation
  • Roll back the stimulus package
  • Huge MAT credit to be set off against future tax
Conclusion
  • Overall, it is a balanced budget (given the circumstances). 
  • There were not much changes, which shows stability. Most of the tax proposals are of clarification in nature or of change in rates of tax.
  • The focus is mainly on growth along with fiscal consolidation
  • Stock Market gave a thumbs up and zoomed
All said, it is a budget. We have to see the actual performance. Hope Pranab walk the talk.

We, the citizens are like Gajni. Yes, the budget is in our memory for just 15 days. After that we will forget this budget and wait for the next budget.

Cheers,
Gopal
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