Can it be said that just because the Accounting Standards are not complied with, the accounts of a company do not present a true and fair picture of its financial position? Is compliance with the Accounting Standards mandatory, or are certain deviations justified? The Supreme Court’s observations in JK Industries v. Union of India, [2008] 143 Comp Cas 325 (SC), appeared to have settled the issue...
True and Fair Accounting
Recent events like Satyam and the economic recession have thrown up several issues about appropriate accounting and auditing practices, discussed here and here. In this context, it is interesting to note a decision of the United Kingdom Queen’s Bench in Macquarie Internationale Investments Ltd. v. Glencore UK Ltd., [2009] EWHC 2267 (Comm). Macquarie Internationale Investments had acquired an...
SEBI’s Proposed Changes on Disclosures and Audit Norms
After the Satyam fraud earlier this year, there was expectation of significant regulatory changes that strengthen corporate governance, disclosure and audit norms in India companies. Some changes did occur almost immediately; for instance, detailed measures were introduced favouring disclosure of pledges by promoters. However, the Companies Bill, 2009 introduced in Parliament a few weeks ago did...
New PCAOB Rule: Impact on U.S.-listed Indian Companies
The PCAOB or Public Company Accounting Oversight Board is a body established in the aftermath of Enron and the enactment of Sarbanes-Oxley and reviews the intensity and the integrity of audits by auditors on a regular basis. Until recently, the requirements of review pertaining to foreign companies (such as Satyam) that are registered with the SEC were somewhat lenient compared to domestic U.S...
Inconsistency in Accounting Norms
There have been news reports lately that bring to the fore the inconsistency between the accounting standards issued by the Institute of Chartered Accountants of India (ICAI) and the requirements in Schedule VI of the Companies Act, 1956 in relation to exchange losses incurred by companies on foreign currency-denominated transactions (see here and here). A Business Standard editorial goes beyond...
Financial Disclosures by Companies
A column by Rahul Roy in The Business Standard deals with the proposed revision and simplification of Schedule VI to the Companies Act. This schedule prescribes the presentation and disclosure requirements for financial statements. The column strenuously argues that the current version of Schedule VI is severely outdated and as to how it should be brought in tune with developments in the...
Accounting for Derivatives Exposure
A recent announcement by the Institute of Chartered Accounts of India (ICAI) has added to the imbroglio over derivatives. Accounting Standard 30 (AS30) that deals with accounting for derivatives was to become mandatory with effect from April 1, 2011. However, the ICAI in an emergent decision has called for an early adoption of AS30 for financial statements as on March 31, 2008. Corporates not...
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