1. ICAI Elections – December 2012
(i) By a Notification dated 5-9-2012, Secretary, ICAI, has notified that the elections to the Central and Regional Councils of ICAI will be held on 7th and 8th December, 2012, in the cities of Ahmedabad, Bengaluru, Chennai, Delhi/New Delhi, Gurgaon, Hyderabad, Jaipur, Kolkata, Mumbai & Pune, Polling will be held on 7th and 8th December. In other places the Polling will be on 7th December only. Results will be declared on 9th January, 2013.
(ii) The number of candidates to be elected will be as under:
(iii) A candidate for Central Council has to pay a fee of Rs. 5,000/- and also provide Security Deposit of Rs. 20,000/-. Fees for candidates for Regional Council is Rs. 2,500/- and Security Deposit is Rs. 10,000/-. The Security Deposit will be forfeited if the candidate for Central Council does not get 2% of valid First Preference votes polled. Similarly, a candidate for Regional Council will forfeit the deposit if he does not get 1% of valid First Preference Votes.
(iv) CA Election Rules provide for compliance with a strict code of conduct by the candidates. A candidate for Central Council cannot incur expenditure exceeding Rs. 6 lakh. Similar limit for candidate for Regional Council is Rs. 4 lakh. All candidates have to file details of expenses with ICAI within 15 days of announcement of results of the elections. Disciplinary action will be taken against a candidate who violates the code of conduct provided for the candidates.
(v) Briefly stated’ the code of conduct for elections to ICAI Councils put restrictions on candidates as under:
(a) Restrictions on addressing conferences, seminars, study circle meetings etc. of our members.
(b) Restrictions on addressing meetings organised by other Trade and Professional Associations.
(c) No gifts, refreshments, parties etc. can be given to voters.
(d) Only one Manifesto/Circular or appeal seeking vote in the election can be issued.
(e) No separate website can be maintained for the election.
(f) Restriction on publication in News Papers, Magazines etc. about candidature of the members.
(vi) Sometimes, our members have a grievance that the institute is not doing enough to address their problems. It is, therefore, necessary for our members to elect a strong Council at the centre as well as at the regional level. This is possible only if each and every member of the Institute considers it to be his/her bounden duty to elect the right type of candidates to the Council. A member should consider whether the candidate will be able to contribute to the cause of the profession and devote time for the activities of the Institute. Integrity, honesty and ability to stick to the right path are the qualities of a good candidate, which should be our touchstone in selecting the right type of candidate in this election. A voter should not be carried away by innovative methods of canvassing adopted by some candidates. It may be noted that, as stated earlier, strict Election Code of Conduct has been introduced and a ceiling on election expenses to be incurred by each candidate is fixed. Our members should ensure that if a candidate is found to be canvassing for votes in a manner which violates the Election code of conduct, it should be brought to the notice of the Secretary to ICAI.
(viii) In elections of this type, each vote is valuable. Our elections are held on the ‘single transferable vote system, under which the voter has to indicate preference about the candidates by inserting figures 1,2,3 etc. against the names of candidates according to his/her preference. Some members are under the impression that only the ‘first preference’ vote is of value. This impression is not correct. A candidate is required to obtain only a specific number of first preference votes for getting himself elected. If the first preference votes obtained by him are more than the required number, the excess is transferred, at appropriate value, to the candidates who have secured 2nd, 3rd, 4th, etc. preferences. If a voter exercises only his/her first preference for a particular candidate and does not mark subsequent preferences and that candidate gets more than the required first preference votes, the balance of votes will go waste. Similarly, if the number of first preference votes received by the candidate are much below the required quota, candidates getting subsequent preferences will get an advantage by way of transfer of such votes at appropriate value. It is, therefore, essential to note that a voter should not select only one candidate of his choice, but should select as many candidates as possible and mark his preferences for such candidates. It may be noted that by giving second or subsequent preferences, the position of the candidate to whom the first preference vote is given will not be jeopardised. By giving subsequent preferences’s the voter will be able to get at least one of the candidates of his choice elected.
2. EAC Opinion
Provision for Warranty under Construction Contract and Corresponding Revenue Recognition:
Facts:
A public sector company (company) is engaged in the field of engineering, manufacture of equipment, erection and commissioning of power projects. In addition, the company is also in the business of transportation, transmission, defence, etc. The normal execution period of a contract ranges between three and five years. The normal warrantee/ guarantee period of a contract is between 18 and 24 months, which starts from the date of completion of trial operation of the project.
The Company has stated that the revenue recognition in respect of long term construction contracts is done based on percentage of completion method in line with the requirements of Accounting Standard (AS) 7, ‘Construction Contracts’. The warranty obligation is created at 2.5% of the contract value based on past trends.
The Company has stated that provision is created towards warranty obligation at 2.5% of the revenue progressively as and when the revenue is recognised and the same is added to ‘actual cost incurred’ upto reporting period for working out percentage of completion under AS 7 contracts. 2.5% of the contract value is also added towards warranty obligation to the ‘total estimated cost’ to complete the work for percentage completion method.
Query:
The company has sought the opinion of the Expert Advisory Committee as to whether the present policy and practice of the company on ‘provision for warranties’, viz. creation of provision towards warranty obligation progressively during construction period and considering the same as “cost incurred” to determine the percentage of completion for revenue recognition under AS 7 is in the line with the requirements of accounting standards?
Opinion:
After considering paragraphs 11 and 14 of AS 29, notified under the Rules, EAC is of the view that a provision should be recognised when there exists present obligation to act or perform in a certain way and other conditions for its recognition under AS 29 are satisfied. Obligation may arise from a binding contract or statutory requirement and may also arise from normal business practice, custom and a desire to maintain good business relations or act in an equitable manner. From the Facts of the Case, it is evident that all the contracts of the company provide for warranty for periods ranging between 12 and 24 months and while executing the contract over a period of 3 to 4 years, the company is always bound to rectify, rework and compensate any defects, short supplies, operational problems of the individual equipment already supplied under construction contracts. Thus, there exists a contractual/customary present obligation in respect of warranty service, which will require outflow of resources embodying economic benefits to settle the obligation. Further, EAC notes that, in the present case, the company can make reliable estimate of the amount of obligation on the basis of past trend. Accordingly, EAC is of the view that a provision in respect of warranty service should be recognised in the extant case of the company.
Further, as regards the timing of recognition of provision, EAC notes paragraphs 15, 16 and 21 of AS 7. After considering the same, EAC is of the view that the expected warranty cost is a contract cost which is directly related to a specific contract. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract should be recognised as revenue and expenses respectively, by reference to the stage of completion of the contract activity at the balance sheet date. In the present case, the company follows the percentage of completion method for recognising its revenue, which indicates that the outcome of a construction contract can be estimated reliably. Accordingly, following the percentage of completion method, the contract costs, including provision for expected warranty costs, should be recognised by reference to stage of completion of the contract activity at the reporting date.
[Pl. refer pages 596 to 599 of C. A. Journal – October, 2012]
3. Campus Placement Programme – September 2012
ICAI had organised the Campus Placement Programme for new members of the profession in August – September, 2012. This programme was held at Ahmedabad, Bengaluru, Baroda, Bhubaneshwar, Chennai, Coimbatore, Ernakulam, Hyderabad, Indore, Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Pune etc. Briefly stated, the result of this programme is as under.
(i) Number of candidates Registered (9382), Interview Teams (86) and Organisations (53);
(ii) Highest salary offered for – Domestic Assignments Rs. 13.77 lakh p.a.
– International Assignments Rs. 16.70 lacs p.a.
(iii) Minimum salary Rs. 4 lakh p.a.
(iv) Number of candidates who got jobs in (a) February/March Programme (933) and (b) August/September Programme (497).
(v) Highest number of jobs offered were in New Delhi (160) and Mumbai (100). Jobs offered in Chennai were (63) and Bengaluru (55).
(Refer pages 671-672 of C.A. Journal for October, 2012)
4. ICAI News
(i) ICAI Publications
(a) Guide to reporting on Pro Forma Financial-Statements.
(b) Compendium of statements on Auditing and Guidance Note (3 volumes) (As on 1-8-2012)
(c) Compendium of Implementation Guides to Engagement and Quality Control Standards.
(d) Data Analytics and Continuous Controls Monitoring.
(e) Technical Guide and Internal Audit to Tendering Process.
(f) Guide on Corporate Social Responsibility.
(Refer pages 691 to 696 of CA Journal for October, 2012)
(ii) Some Ethical Issues
Ethical Standards Board of ICAI has answered some questions on Ethical Issues at page 558 of C.A. Journal for October, 2012.
