Dear members,
By the time you read this page, we would have welcomed the New Year with lots of hopes as well as resolutions. My colleagues at the BCAS join me in wishing all of you a very Happy New Year. Let us hope that 2015 will bring a lot more cheer, good health and peace to everyone, and all of us indeed succeed in our resolutions.
The year end is also the season for the experts in various fields to analyse the past trends and come up with forecasts for the new year eventhough an increasingly uncertain world makes this virtually impossible. Recent developments such as falling oil prices, tumbling currencies in emerging markets,the financial crisis in Russia and the looming possibilities of black swan events underscore this challenge.
Climate change is an important field where the world needs to analyse the trend and ensure that the forecast is not bleak. The UN Framework Convention on Climate Change proclaims that the climate change is disrupting national economies, costing us dearly today and even more tomorrow. The record for the warmest monthly global sea surface temperature has been broken three times this year. The five warmest months of sea surface temperature ever recorded have all taken place in 2014. Author Naomi Klein says, “A destabilised climate is the cost of deregulated, global capitalism: it’s unintended, yet unavoidable consequence.” Led by the UN, the world strives to stymie the impact of the climate change. The recently concluded 20th Annual Climate Conference proclaimed “Lima Call for Climate Action”, that is a step forward in the right direction even though it is perceived somewhat as a compromise.
Can accountants solve global problems like climate change and save the planet? Author Jane Glesson-White raises this very interesting question in her recent book “Six Capital”. She advocates that the seemingly endless growth that capital offers us is, in fact, limited by the earth’s resources and comes at a huge price to the planet and our wellbeing. Jane emphasises the need for the second revolution in accounting to transform corporate accounting and natural capital accounting for nations and the global economy since double-entry bookkeeping emerged in medieval Italy.
Jane insists that the familiar categories of industrial and financial capital bequeathed by the mercantile and industrial ages be broadened to include four new categories of wealth: intellectual, human, social and natural. She further argues that incorporating these new categories of capital into our financial statements and GDP figures would be the only way to address many crises that we face today. Indeed, this is a very interesting perspective that the accounting profession will need to appreciate sooner than later.
Recently, the Ministry of Finance (MoF) released the 2014-15 mid-year economic analysis report. It expresses grave concerns about India being afflicted by the “balance sheet syndrome with Indian characteristics”. Overexuberant investment in the last few years, especially in the infrastructure and in the form of Public-Private Partnerships (PPPs), has triggered this challenge. The report pegs the total of the stalled projects at Rs. 18 lakh crore hampering corporate profitability and leading to over-indebtedness in the corporate sector. As a result, the banking sector is displaying risk aversion and is increasingly unable and unwilling to lend to the corporate sector.
This MoF report also acknowledges that the above problem is further compoundedby relatively weak institutions. It states that the work on effective legal processes (the Corporate Debt Restructuring Systemand the SARFAE SI Act) that can allocate the pain of past decisions between investors, creditors, consumers, and taxpayers are in progress.
The suggested remedy of pursuing a series of reforms to de-bottleneck existing projects, reviving public investment, FDI in insurance, ushering the GST and direct transfers in place of subsidies appear to be ambitious. Let us hope that the Indian Government will be able to put behind the election fever of 2014 to bring in required reforms and move forward on the much-needed governance front.
On 19th December 2014, the Comptroller & Auditor General (CAG) tabled its report no. 32 of 2014 in the Parliament. In its audit findings, the CAG has listed 367 cases of non-adherence to various provisions of the Income-tax Act by Chartered Accountants in tax audit reports and other certificates during the financial years 2010-11 to 2012-13. The CAG has alleged this nonadherence has led to deny dues of Rs. 2,813.11 crore to the Government and has recommended putting in place a mechanism to initiate actions against erring Chartered Accountants under relevant provisions of the law.
The report lists cases such as furnishing incorrect information in respect of depreciation and amortisation, brought forward loss/depreciation, personal/capital expenditure and excess allowance of exemptions among others. The report also listed cases with names of the Chartered Accountants where the number of tax audit assignments exceeds the limit of 45 prescribed by the Institute of Chartered Accountants of India (ICAI) and has stressed on the need to strengthen the monitoring mechanism and enforce this limit.
Prima facie, the audit findings seem to be largely based on differences arising from a comparison between information in the tax audit reports and the assessment orders. Given the track record of aggressive practices adopted by the assessing officers, a detailed examination is required to evaluate the validity of the above differences and whether the Assessees have preferred any appeal. Similarly, there appears to be some incongruity in the data on the number of tax audit assignments. The numbers provided seem to include not just tax audit assignments but other certifications as well.
There cannot be two opinions about the need to take action in cases where there are lapses. However, pending detailed examination of the matter, the disclosure of confidential information containing the names of the assessees and the Chartered Accountants appears to be premature. I am sure the ICAI will take up this matter with the CAG and the MoF at the earliest, to address these issues and take corrective action.
Is there a difference between Success and Excellence? On 17th December 2014, the Society organised a talk by Shri Swami Swatmananda on “Pursuing Excellence in Profession – a Holistic Approach”. In this talk organised under the auspices of Shri Dilip Dalal Oration Fund, revered Swamiji shared the secrets of how to practice excellence in our daily life and achieve success, happiness and fulfilment. Don’t miss to go through the video recording of this lecture meeting at www.bcasonline.tv and benefit from the same, in case you could not attend the lecture meeting.
The present team of the Office Bearers at the BCAS completes six months in office on 6th January 2015. Various initiatives have been taken during this period to continue improvements in the administration of the Society. Conscious efforts are being made to make our response time shorter through the on-going staff coaching and training. Technology initiatives are being pursued to improve our reach and services. Efforts are also being made to bring about innovation in terms of the subjects and speakers at our programmes. Younger members are being proactively encouraged and groomed. I invite your feedback, comments, suggestions and contributions to ensure that we continue to take our Society to greater heights.
