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Niall Fitzerald, Former CEO, Unilever once said that “Corporate Social Responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it because it is good for our business. The Companies Act 2013 requires that every company (private/ public unlisted / listed) with Networth of ≥ INR 500 crore (5 billion) or Turnover of ≥ INR 1,000 crore (10 billion) or Net profit of ≥ INR 5 crore (50 million) during the financial year will constitute a CSR Board committee (CSRC). The board will ensure that company spends, in every financial year, at least 2% of its average net profits during the immediately preceding 3 years, in pursuance of CSR policy. The CSR committee will consists of 3 or more directors with atleast 1 independent director. The Board’s report should disclose the composition of CSRC. The board will approve the CSR policy and disclose its contents in the board report and place it on the company’s website. If...

When a company buys back or reacquires its own shares, such portion of shares are called as Treasury Shares. These are the shares that the company keeps in its own treasury and therefore they will be deducted from equity. These shares don't pay dividends, have no voting rights, and should not be included in shares outstanding calculations for EPS. No gain or loss is recognized in the statement of profit and loss on the purchase, sale, issue or cancellation of an entity’s own equity instruments. Case Study 1: Accounting of buy back of equity shares IStaR Co buys back 100,000 of its own equity shares in the market for INR 10 per share. The accounting entry for recording the purchase of treasury shares as a deduction from equity is as follows: Equity – Treasury Shares a/c………Dr                                 ...

EPS is simply profit amount divided by number of shares. Valuing a company as a whole is crucial during merger negotiations, buyouts or in similar arrangements – relatively rare events in the ongoing life of a company. For day-to-day valuations, many analysts prefer to focus on the value of single equity share. Here the earnings per share (EPS) computation helps to know how much of the company’s total earnings accrue to each share. A simple capital structure exists when a company has no convertibles, no options or no warrants outstanding. The simple formula used to compute earnings per share (EPS) is: To illustrate, IStaR Ltd. discloses the following information in the year 2012: January 1 December 31 Equity shares ( ` 1 face value) 160,000 shares issued and outstanding 160,000 200,000 shares issued and outstanding 200,000 Reserves 12,000,000 16,000,000 Retained earni...

ANALYSIS OF THE NEW COMPANIES  BILL 2012   RELIANCE INDUSTRIES LTD Posted by ~ Er Tejas Somaiya Prelude The Companies Bill 2011 was laid before the Parliament in December 2011 and was referred to Parliament Standing Committee on Finance. The Standing Committee submitted its report in June 2012 and based on Standing Committee's report, the Companies Bill 2011 was amended and was introduced as the new Companies Bill, 2012. The Bill was passed by the Lower House of Parliament on 18th December 2012. The Bill is pending the Upper House of Parliament-the Rajya Sabha and therefore, may undergo further changes. The Bill is divided into 29 chapters and contains 470 clauses as against 658 sections in the existing Companies Act, 1956. Corporate Governance:   Concept of Independent Directors ("ID") has been introduced for the first time in Company Law. Some of the important points relating to IDs are mentioned below: Maximum number of direct...

IAS 39 mandates some financial assets and liabilities to be subsequently measured at ‘amortized cost’.  This measurement concept is a management theory put in accounting practice. It means that the contractual interest rate each period should be adjusted to amortize the transaction costs over the expected life of the financial instrument. The amortization is calculated on an effective interest rate (EIR) / yield-to-maturity (YTM) basis. The EIR is the rate that exactly discounts the stream of principal and interest cash flows excluding any impact of credit losses, to the initial net proceeds. It is important to note that EIR method does not take into account any future credit impairments anticipated on that instrument. The carrying amount of the financial instrument subsequently measured at amortized cost is computed as: Transaction costs are an integral part of the amortized cost calculation. They are defined as costs that are directly attributable to the acquisit...