By P. N. Shah
H. N. Motiwalla
Chartered Accountants
ICAI and Its Members
1. ICAI News :
(Note : Page Nos. given below are from C.A. Journal
for June, 2010)
(i) A New Grievance Resolution Mechanism (e-sahaayataa)
:
‘e-sahaayataa’ is the only e-channel for the entire base of
members and students of the Institute and other stakeholders of the profession,
wherein all their queries/complaints/grievances pertaining to the day-to-day
working shall be catered to and be resolved in a time-bound and transparent
manner. This service is available on ICAI website (htpp://www.icai.org/help).
Objectives :
-
To provide timely
services to all the stakeholders of the profession throughout the globe.
-
To resolve the
query/complaint/grievance within 3-7 days from the date of submission of the
same.
-
To eliminate the
operational bottlenecks and smoothen the flow of the education process of
Chartered Accountancy.
Key statistics :
Total
queries/complaints/grievances submitted till May 20,2010 |
1742 |
Total
queries/complaints/grievances resolved till May 26, 2010 |
1689 |
Total
queries/complaints/grievances under the process |
53 |
Scope :
‘e-Sahaayataa’ caters only to the
queries/complaints/grievances pertaining to the day-to-day working of the
Institute which are general in nature. This facility is not meant for
registering or making allegations, personal observations and personal comments.
(Page 1918)
(ii) Implementation of S. 51A of Unlawful Activities
(Prevention) Act, 1967 :
ICAI has issued the following announcement on Page 2046.
The provisions of the Unlawful Activities (Prevention) Act,
1967 were amended in 2008, by inserting S. 51A which was notified on 31-12-2008
by the Government of India. S. 51A reads as under :
“51A. For the prevention of, and for coping with terrorist
activities, the Central Government shall have power to :
(a) freeze, seize or attach funds and other financial
assets or economic resources held by, on behalf of or at the direction of the
individuals or entities listed in the Schedule to the Order, or any other
person engaged in or suspected to be engaged in terrorism;
(b) prohibit any individual or entity from making any
funds, financial assets or economic resources or related services available
for the benefit of the individuals or entities listed in the Schedule to the
Order or any person engaged in or suspected to be engaged in terrorism; and
(c) prevent the entry into or the transit through India of
individuals listed in the Schedule to the Order or any person engaged in or
suspected to be engaged in terrorism.”
In order to implement the provisions of S. 51A effectively,
the Ministry of Home Affairs, Govt. of India requested the Ministry of Corporate
Affairs to issue an appropriate order to ICAI, ICSI and ICWAI to sensitise their
members to the provisions of S. 51A of the Unlawful Activities (Prevention) Act,
1967. Accordingly the Ministry of Corporate Affairs vide its letter dated
22-3-2010 asked the ICAI to advise its members to act as per mandate of the
Ministry of Home Affairs.
Accordingly, all members of ICAI are informed that as and
when any member comes across any such fact which is connected with the
violation(s) of provision(s) of the Unlawful Activities (Prevention) Act, 1967,
he must take action forthwith for the implementation of S. 51A as per procedure
laid down in the Office Memorandum dated 22-2-2010 issued by the Ministry of
Home Affairs, Government of India.
In other words, the members of ICAI must ensure that in case
any of their client match with the particulars of designated individual/entity,
as per Order dated 8-7-2009, wherein the list of such designated
individual/entities have been given, they shall immediately, not later than 24
hours from the time of finding out such client, inform full particulars to the
Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No. 011-23092569 and
also convey over telephone on 011-23092736. The particulars apart from being
sent by post should also be conveyed on e-mail id:isis@nic.in.
(iii) ICAI publications :
The following Technical Guides are issued by ICAI :
(a) Technical Guide on Internal Audit of Construction
Industry
(b) Technical Guide on Internal Audit of Educational
Institutions
(c) Technical Guide on Accounting for Development
activities of SEZs. (Pages 2048-2049)
2. Accounting Standards :
The Accounting Standards Board has issued further exposure drafts revising the following Accounting Standards and also issued exposure drafts of New Accounting Standards after convergence with the IFRS/IAS for public comments :
i) Revised Standards :
a) AS-22Income Taxes(corresponding to IAS-12)
b) AS-24Non-Current Assets held for Sale and Discounted Operations (corresponding to IFRS-5)
c) AS-27Interests in Joint Ventures(corresponding to IAS-31)
d) AS-28 Impairment of Assets(corresponding to IAS-36)
ii) New Standards :
a) AS-33 Share-based Payment (corresponding to IFRS-2)
b) AS-36 Accounting and Reporting by Retirement Benefit Plans (corresponding to IAS-26)
3. Capitalisation of expenditures in re-spect of projects under construction (EAC Opinion) (Pages 1937-1938) :
Facts :
A government company is engaged in the construction and operation of thermal power plants in the country. The company has also diversified into hydro-power generation, coal mining and oil & gas exploration, etc. The company is an electricity generation company and is governed by the provisions of the Electricity Act, 2003. The company prepares its annual financial statements as per the provisions of t h e Companies Act.
The company has three-tier organisation structure consisting of projects/stations, regional headquarters and corporate office. The company is undertaking constructions of a number of new power projects at the greenfield sites as well as expansion of existing projects. Some of the key activities related to the construction projects, such as design & engineering, award of major contracts, post-award contract management, project monitoring, etc. are performed centrally at the corporate office. The expenditure of engineering, contracting, project monitoring, hydro region head-quarters, coal mining and finance concurrence departments were considered as expenditure during construction and allocated through the project under construction/expansion on systematic basis i.e., capital expenditure incurred during the year at these projects. Expenses of other departments providing common services were charged to the statement of profit and loss. Further, administration and general overhead expenses attributable to construction of fixed assets incurred till they were ready for their intended use were identified and allocated on a systematic basis to the cost of related assets. However, the government auditor observed that administration and other general overhead expenses were usually excluded from the cost of fixed assets since they did not relate to a specific fixed assets, while the company has allocated expenses relating to the divisions on the ground that they perform functions relating to construction only. Hence according to Auditors the allocation of expenses was not in accordance with AS-10.
Query :
On these facts, the company has sough the opinion of the Expert Advisory Committee (EAC) as to whether allocation and capitalisation of expenses related to the identified departments of corporate office and the regional headquarters which were engaged in project engineering, designing, contract management and project monitoring activities, etc. to/at the project under construction/expansion was correct.
EAC Opinion :
After considering paragraphs 9.1, 9.2 and 10.1 of AS-10 the Committee observed that the basic principle to be applied while capitalising an item of cost to a fixed asset/project under construction/ expansion is that it should be directly attributable to the construction of the project/fixed assets for brining it to its working condition for its intended use. The costs that are directly attributable to the construction/acquisition of a fixed asset/project for bringing it to its working condition are those costs that would have been avoided if the construction/acquisition had not been made. These are the expenditures without the incurrence of which, the construction of project/asset could not have taken place and the project/asset could not be brought to its working condition, such as site preparation costs, installation costs, salaries of engineers engaged the construction activities, etc. The avoidance of costs has the basis of identifying directly attributable cost for the purpose of capitalisation is also supported by Accounting Standard (AS ) 16, ‘Borrowing Costs’. In the present case, the Committee is of the view that it should be seen that whether the expenses incurred on the activities of the various departments are directly attributable to the construction as discussed above. Accordingly, if expenses incurred at various departments are directly attributable to construction, these can be capitalised with the cost of concerned fixed asset(s)/project(s).
In view of the above, the capitalisation of expenses related to various departments of corporate office and the regional headquarters to the projects/assets under construction/expansion would be correct provided the expenses incurred on the activities of these departments can be considered to be directly attributable to the constriction of project(s)/fixed asset(s) for bringing them to their working condition as discussed above.
[Refer pages 1937 to 1940 of C.A. Journal]
