SEMINAR ON IFRS BY ICSI THE INSTITUTE OF

SEMINAR ON IFRS BY ICSI THE INSTITUTE OF COMPANY SECRETARIES OF INDIA WITH RELIANCE COMMUNICATIONS & WIRC ICWAI

22 nd AUGUST 2009 • • THRU 50+ CITIES AND 75+ RELIANCE VIDEO CONF LOCATIONS SPEAKER : Rammohan Bhave, CS, ICWA, CA mohanbhave@gmail. com Dr Mrs Anjali Bhave, ICWA, Ph. D.

DO WE HAVE ROLE IN IFRS? • • • senior members of our profession ASK ARE WE CONNECTED WITH IFRS? SO this is a humble attempt to highlight the role of WE PROFESSIONALS in IFRS.

Present Role of CS • Dear professional colleagues to • mull over below mentioned vital role of a CS. • CS in industry signs the balance sheet. • CS in effect certifies adoption of Corporate Governance. • He/She vouches for transparency.

Role and responsibility of the CS • All the laws of the land, general laws compliance are : • Companies Act (Corporation Laws) • SEBI Rules, FEMA, RBI and Banking regulations are the forte of CS.

Role and responsibility of the CS • In the corporate information & • below the financial statements CS’s name appears • Companies Act includes Schedule VI provisions relating to • financial statements.

Vital role of CS • Majority notes relates • liabilities under various laws • excise, customs, court cases

• sales-tax, Income-tax, land deals • mergers and acquisitions • related parties • investment in balance-sheets

• foreign exchange transactions • labour claims, BIFR • foreign country dispute, industrial tribunal • arbitration matter, rights and bonus issues,

• ESOP • other employee related matters • trusts like PF, SA, Gratuity • associates and JVs

• associates and JVs • indemnities and guarantees • investors complaints • are all recorded by CS and the details are provided by Company Secretarial dept.

Members in Industry • principle officer of the company • holds the board meeting • AGMs and EGMs and records sensitive issues. • party to the audit committee, remuneration committee, shareholders grievance committee • directly responsible for conduct of the affairs of these meetings.

Members in Industry: contd • role in quarterly limited review certification. • • • Even the young CSs are designated as CS of the smaller companies within the big groups & carry huge responsibility.

• Members in Practice: • Legal compliance certificate are issued by practicing CS. • The difference in accounting treatment is going to take the practicing CS by surprise. • A Lot of Practicing CS are doing an outsourced CS role which puts them under heavy and onerous responsibility.

Spirit of IFRS • IFRS makes it compulsory to make group consolidated accounts. • includes all controlled entities • associates, JV and SPVs, • Indian as well as foreign. • The control concept in IFRS is very vide. • Practically, all the companies are preparing financial statements on financial year basis, a minority under tax law while a majority under Companies Act as well as tax laws.

Adoption from any reporting period starting on or after 1 st April, 2011 • First B/S is 1 st April 2010 • Converted from Indian GAAP to IFRS • 3 balance-sheets (Statement of financial position – 1 st April 2010, 1 st April 2011 & 31 st March 2012 • & 2 P & L (statement of comprehensive income) 2010 -11 & 2011 -12

In for shocks • treatment of risk & reward and control • in transfer of assets is expected to give shock to CS. • method of consolidation widely differing

• IFRS talks about substance over form. • SO lease transactions, borrowing cost • going to play havoc right upto PE/EPS ratios. • Everybody knows about creative accounting • carried out in securitisation of debts.

group and consolidation principles • will bring in extreme transparency • in which I foresee very interesting dialogue • between promoters and CS • So here is a note of caution

CHALLENGES IFRS • loans, the register of charges • will be moot point for discussions and heart-burns. • Change in method of inventory valuation requiring retrospective disclosures • will open the pandorum box

• A CS will also get a rude shock • when debentures will appear under equity • preference shares will appear under loans in majority cases.

• Lesser said the better • about NPAs in the balance-sheet • More so for banking and financial services. • Same is the case with surplus fund investing entities.

Hidden skeletons COME OUT • Listed companies are of course, covered • but even, private limited companies, unlisted and delisted companies • partnership firms and sole proprietor businesses • Will come out with hidden skeletons will be completely transparent.

80% OF India GDP covered • • Last but not the least, all entities having INR >100 crore turnover > 25 crore borrowings remember the last clause in the definition of entity • also covers even the smallest holding and subsidiaries of such entities

Linkages: IFRS and CS • So the role is clear • Paramount questions are ; • Does the Designated CS in Industry want to sign the annual accounts which are totally different, which he/she doesn’t even understand? • Do the practicing CSs want to issue compliance certificate for the figures and statements which they do not understand?

Linkages: IFRS and CS • Will the IFRS transparency norms keep CS in the good books of owners/promoters? ? ? • Will they be able to reply the questions as to how the profitable accounts under Indian GAAP have become loss making accounts under IFRS.

Linkages: IFRS and CS: Come, Wake up, My Dear CS professional • Does the CS want to become a torchbearer of Corporate governance or remain a meek tail of owners and promoters? • Does the CS want to become a rajdoot of transparency or get dragged by CFO’s creative accounting by remaining ignorant?

Linkages: IFRS and CS • Does the CS want to become a role model of Principles or want to carry out eye wash for stakeholder/shareholders? • Does the CS want to be a Praneta of Substance over form in the revolution of corporate history in annual statements or want to become a Kataputli in the hands of money-mongers?

• • • Think here is the SOLUTION I am sure & I appeal President of OUR INSTITUTEs to start E-learning on IFRS BUT DEAR MEMBERS Play your role and do not remain just doing minutes and agenda

• A BIG • THANK YOU • FOR HUGE E-GATHERING • R N BHAVE mohanbhave@gmail. com