Know Your Rights!!

  Prior to the introduction of IFRS 9, OCI had 5 components and the easier way to remember was the acronym CAART – which is: C – The effective portion of gains/losses on hedging instruments in a C ash flow hedge A - A ctuarial gains and losses on defined benefit pension plans  A - Gains and losses on A vailable-for-sale financial assets R - R evaluation surplus related to property, plant and equipment T - Gains and losses arising from T ranslating the financial statements of a foreign operation Now with IFRS 9 earlier adoption, the acronym has changed from CAART to CRAAFT C – The effective portion of gains and losses on hedging instruments in a C ash flow hedge R - R evaluation surplus related to property, plant and equipment A - A ctuarial gains and losses on defined benefit pension plans  A - Gains and losses on A vailable-for-sale financial assets F - F inancial liabilities designated as at fair value through profit or loss: fair value changes attr...

Where a company’s sources of finance includes either securities convertible into equity shares, or options and warrants which entitle holders to obtain equity shares, such financial instruments increase the likelihood that additional equity shares will be issued in the future. This possible increase in the number of shares is called potential dilution. Case Study: Suppose IStaR Ltd. has 30,000 equity shares outstanding in the market along with INR 100,000 of convertible debentures – that is, bonds that can be converted into equity shares. According to the terms of the debenture agreement, each INR 1,000 face value bond can be exchanged for 300 equity shares. If all the debentures were exchanged, bondholders would receive 30,000 new equity shares. The effect on current equity shareholders would be to dilute their claim to earnings from 100% - when they own all equity shares – to 50% - when they own only half of all outstanding shares. Computed Basic EPS ignore this potential...

IFRS 9 - Financial Instruments much awaited amendment is finally out on November 19, 2013. The entities which need to  deal with the financial instruments in line with IFRS, are probably aware of multiple standards covering this really titanic topic: IAS 39, IFRS 9, IFRS 7, IAS 32 and partially IFRS 13.  The new standard - IFRS 9 - is still under development. Let's see what are the 3 main changes brought in the amended IFRS 9: Mandatory effective date of IFRS 9 (1 January 2015) was removed. It means that you can apply old IAS 39 after 31-12-2014 Financial Liabilities (Own Debt) at Fair Value has new requirements for the accounting and presentation of changes in the fair value when own debt is measured at fair value New hedge accounting rules! New hedging rules were long-awaited, because the older rules in IAS 39 are really strict and hard to apply.  Further post will explain Hedge Accounting in brief..Stay glued:)

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...