page 700- customer satisfaction and value additions in bpo

PRESIDENTG. N. Venkataraman

email : [email protected] PRESIDENT

B. M. Sharmaemail : [email protected] COUNCIL MEMBERS

A. N. Raman, A. S. Durga Prasad,Ashwin G. Dalwadi, Balwinder Singh,Chandra Wadhwa, Hari Krishan Goel,Kunal Banerjee, M. Gopalakrishnan,

Dr. Sanjiban Bandyopadhyaya,S. R. Bhargave, Somnath Mukherjee,

Suresh Chandra Mohanty, V. C. Kothari,GOVERNMENT NOMINEES

Jaikant Singh, P. K. Sharma, R. K. Jain,S. C. Vasudeva, T. S. Rangan

CHIEF EXECUTIVE OFFICERSudhir [email protected].

Senior Director (Examinations)Chandana Bose

[email protected] Director

(Administration & Finance)R N Pal

[email protected] (Technical)

J. P. [email protected].

Director (Studies)Arnab Chakraborty

[email protected] (CAT)L. Gurumurthy

[email protected] Director (CEP)

D. [email protected].

Additional Director (Membership) cumJoint Secretary

Kaushik [email protected].

Additional Director (International Affairs)S. C. Gupta

[email protected]

Sudhir GalandeEditorial Office & Headquarters

12, Sudder Street, Kolkata-700 016Phone : (033) 2252-1031/34/35,

Fax : (033) 2252-1602/1492Website : www.icwai.org.

Delhi OfficeICWAI Bhawan

3, Institutional Area, Lodi RoadNew Delhi-110003

Phone : (011) 24622156, 24618645,Fax: (011) 24622156, 24631532,

24618645

TheManagementAccountan t

« Official Organ of The Institute of Cost and Works Accountants of India

established in year 1944 (Founder member of IFAC, SAFA and CAPA)

Volume 44 No. 9 September 2009

the management accountant, September, 2009 679

Editorial 681

President’s Communique 682

Chairman (Research & Journal)Communique 684

Cover FeaturesImplications of IFRS on HistoricalCost Accountingby Balwinder Singh &

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

A. N. Raman 686

Strategic Focus on Primary andSecondary Packing-Need for CostAccounting Standards

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

by Dr. C. Samuel Joseph 697

Customer Satisfaction and ValueAdditons in Business ProcessOutsource (BPO)/Financial ServiceIndustry–A study as to how toMeasure and Monitor by using SixSigma and Lean tools

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

by N. Raveendranath Kaushik700

A Review of Literature on Life CycleCostingby S. Aravanan &

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

P. Sivasakkaravarthi 703

ERP savvy CMA

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

by N. K. Patel 712

International Good Practice Guidance

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

(IGPC) 714

IFRS has Implication for InternalAuditors 718

Recent Developments in FinanceIFRS – The Global Financial ReportingLanguage

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

by Muthamizh Vendan Murugavel722

Limited Liability Partnership: A newRevaluationby Dr. A. Selvaraj &

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

K. Kannusamy 726

About Entrepreneurs, Brands andBrand Equitiesby K R Bhargava 730

Emerging Trends in FinanceCarbon Emission Reduction trading inIndia : Offsetting the Danger of CarbonCreditby Dr. Barnali Chaklader 734

Examination Programme 720

Legal Updates 738

Programme 743

Regions & Chapters 758

IDEALSTHE INSTITUTE STANDS FOR

q to develop the Cost and Manage-ment Accountancy profession q todevelop the body of members andproperly equip them for functionsq to ensure sound professionalethics q to keep abreast of newdevelopments.

The views expressed bycontributors or reviewers in thisJournal do not necessarily reflect theopinion of The Institute of Cost andWorks Accountants of India nor canthe Institute by any way be heldresponsible for them. The contentsof this journal are the copyright ofThe Institute of Cost and WorksAccountants of India, whosepermission is necessary forreproduction in whole or in part.

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680 the management accountant, September, 2009

MISSION STMISSION STMISSION STMISSION STMISSION ST AAAAATEMENTTEMENTTEMENTTEMENTTEMENT

“ICWAI Professionals would ethicallydrive enterprises globally by creatingvalue to stakeholders in the socio-economic context through competenciesdrawn from the integration of strategy,management and accounting.”

VISION STVISION STVISION STVISION STVISION ST AAAAATEMENTTEMENTTEMENTTEMENTTEMENT

“ICWAI would be the preferred source ofresources and professionals for thefinancial leadership of enterprisesglobally.”

DISCLAIMER

The views expressed by the authorsare personal and do not necessarilyrepresent the views and should notbe attributed to ICWAI.

Corrigendum

The August issue of the ManagementAccountant inadvertently mentionscontributor of book reviews on Pages664 and 665, Dr Sumita Chakrabortyas Director (Studies). Her correctdesignation should be Deputy Director(Studies). The error is genuinelyregretted.

Editorial


The recent global downturn, more than any other time,has brought to the forefront the urgent need for costmanagement in organizations across the globe. With topline figures shrinking, companies are adopting measuresto protect their bottom lines through cost control.Sustained cost management has two core benefits: theability to gain an "operating advantage" and the creationof "structural advantage" within an organization. In sucha scenario, it is but imperative to revisit the realms ofcosting and cost control and understand the role of CostAccountants in changed environment.

Costing has undertaken a long journey from being just aninventory valuation and product-costing tool to a widermanagement philosophy. The shift in manufacturing fromproducing standardized goods in large quantities in 1980sled to cost accountants combining the rigour andconventional abilities of traditional costing techniqueslike job and process costing with the improved analyticalcapacity and 'causality' principle of activity based costing.The development of the concept of target costing was yetanother important milestone in that it not only marked ashift from hitherto cost plus pricing to a target returnpricing, but it also expanded the realm of costing beyondtraditional cost accountants to product marketing andpricing mangers.

At this juncture it is important to differentiate betweencost reduction as a one-time, short term measure tostabilize/ improve profits and cost optimization as a long-term, strategic measure which both leads to sustainablecost benefits and also adds value to customers. The secretbehind the success of cost optimization strategy vis-à-vis a functional-centric cost reduction thinking is that theformer is associated with an enterprise wide appreciationof process linkages, ability to discover cost drivers andmanaging the costs without affecting customer valuedrivers. These benefits of cost optimization have broughtto the forefront the concept of Lean Management, whichtoday finds wide applicability across all industries. Thecore idea behind the lean philosophy is to create morevalue for customers through fewer resources. Toaccomplish this, lean thinking changes the focus ofmanagement from optimizing separate technologies,assets, and vertical departments to optimizing the flow ofproducts and services through entire value streams thatflow horizontally across technologies, assets, anddepartments to customers.

This development highlights another new trend, namelythe increasingly active and changed role of costaccountants in business. The Cost Managementprofessional of today is no longer a passive agent, whoserole is limited to auditing/ cost control functions; ratherhe is a trusted business partner, providing the vital costinformation needed by management in the pursuit of anoptimal mix of activities and processes to drive sustainedcustomer value. An integral component of the CostManagement evolution is a focus on the importance ofperformance measurement. The Balanced Score Cardhighlights the symbiotic relation between costingmanagement and enterprise resource governance for e.g.how ABC can be combined with information provided inthe Balanced Scorecard to assist an organization indetermining the true profitability of targeted customersegments. Similarly, costing can be used a broad strategictool to examine the true cost of current processes in aneffort to determine whether the expected benefits incustomer outcomes arising from the process exceed thecost of engaging in the activity. The popularity of Kaizenand Six Sigma are pointers towards how cost managementis an inextricable tool of management control.

The current issue brings forth a bouquet of rich articleson the topic of Costing. Efforts have been made to blendboth theoretically strong articles along with practicalissues to suit everyone's tastes. There are articles, whichilluminate us on how the cradle-to-grave concept of LifeCycle Costing can be used a strategic tool for gainingcomparative advantage and how lean tools can be usedfor better customer satisfaction. On the other hand,practising members have shared their experiences in theircorporate spheres by highlighting how a Cost Accountantcan leverage his/ her ERP costing configuration knowledgeto achieve value maximization for his organization andinformed us about the innovative cost accountingstandards that can be used in the packaging industry. Forthe benefit of our members we have also compiled theInternational Best Practices Guidelines issued by IFAC.Our Central Council Members were involved in extensiveand painstaking brainstorming with the experts in thebusiness over the implications of IFRS on historical costingstatements and their results have indeed been eye-openerfor us. Their enriching views on this topic have also beenincluded in the current issue so that members may beaware of the latest developments. We wish our readers avery happy Dusshera and joyous Id.

Cost Counter


My dear professional colleagues,

My greetings to all of you for the 63rd Independence Day. I hadthe opportunity to hoist the National Flag at the ICWAI, HQKolkata in the presence of few council members and all officialsof Kolkata. I am also happy to note that similar celebrations tookplace in our regions and chapter offices.

I am conveying to the members of our profession that wheneverany opportunity is denied to our members in spite of ourqualification and merits, we are immediately taking the action with the concernedresponsible authorities to give due recognition to the Cost and ManagementAccountants.

Few days back all of us are aware about the press note issued by the Central VigilanceCommissioner regarding non recovery of crores of rupees by bankers on accountof wrong certification by Chartered Accountants. Immediately we have brought thismatter to the notice of our Minister and have demanded from MCA inventory valuationas per Cost Accounting Standards by companies with bank borrowing beyond aprescribed limit under Companies Act due to CVCs report. We are pursuing thismatter.

The present generation is powered by knowledge to meet the challenges ahead. Thiscan be acquired only by technical publications by the Institute and participating intraining programmes organized on various current topics by the Institute from timeto time. The members of the Institute should avail these facilities to interact withdifferent persons drawn from several sectors as this experience of sharing knowledgeis most essential to sharpen our tools. This includes our Training & ProfessionalDevelopment meetings on IFRS programmes.

Members should also devote their precious time to contribute articles to our journal'Management Accountant'. I also appeal through this page, for our members, toshare their experiences on select topics which can lay the foundation to developthem as guidelines and lead the way to shape them as monographs and Standards.

The members in practice who have a unique blend of knowledge and experienceshould come forth to disseminate them for the benefit of others. The RegionalCouncils and Chapters should organise Study Circle Meetings which will providethe platform to share this knowledge. The Institute through the Chairmen of Regional

lPresident�s Communique l


Council and Chapter Co-ordination Committee will ensure this message percolatesand becomes a regular feature all over the country.

The month of August heralds Presentation of Budget by the Finance Minister followedby Draft Direct Taxes Code proposing moderate taxes to pep up investments, savingsand most important the revival of the capital markets. Here again the definition ofaccountant has been limited to Chartered Accountants and we are taking up with theFinance Ministry to include Cost and Management Accountants also like we havealready demanded our inclusion in Section 288A of Income Tax Act. The industryand business community has reacted favorably to the bold and innovative proposalsof the Finance Minister and the slump in the business, seems to be a by gone word,with already the Industrial Sector showing a growth of 7.8% powered by themanufacturing sector. The global scenario is also one of revival, and the professionwelcomes this turnaround, as without a healthy nation and business activity wecannot grow in isolation.

I am happy to inform you that ICWAI participated in the recent SAFA meetings andconference in Karachi, Pakistan. The team was led by me along with the immediatepast president Shri Kunal Banerjee and Mr. V. C. Kothari and Mr. A.N.Raman. Itwas our pleasure in participating in the memorial lecture organized by ICMAP in thememory of their founder president Late Mr. Md. Shoaib, who happened to be ourfounder president also. The crowd applauded at Karachi when I proclaimed that Iam the 52nd president having received the batton from Late Mr. Md. Shoaib andtheir successors.

Regards,

(GN Venkataraman)

President

Date : 25 August, 2009

lPresident�s Communique l


Communiqué from Chairman Research and Journal CommitteeDear CMA Pariwar,

The Council of ICWAI has entrusted the responsibility to assist the Research and Journalrelated activities of the Institute to me recently. The Management Accountant Journal of the Instituteis being published for many years to serve the profession.

It is now desired to start new features in the Journal to update the readers with latest developmentsnot only in India but also around the globe. We propose to bring out special issues on:

1. Goods and Service Tax

2. Direct Tax proposals and Direct Tax Code

3. Cost Management and Innovative Strategy in current global recession

4. Cost and Management Accountant and proposed Companies Bill

5. Mergers and Acquisitions for consolidation and growth of businesses

6. Anti - dumping proceedings

7. CMA and good corporate governance code of SEBI

8. Cost Management for Healthcare

9. Valuation of businesses

10. Audit of Bank Borrowers and con-current audit of Banks' Branches

11. CMA an Entrepreneur

It is also proposed to publish special articles regularly on Direct and Indirect Taxes, Enterprise Management,Corporate Laws, Capital Markets, Audit, Banking and Finance, Entrepreneurship Development, International FinancialManagement, Cost Management during current global melt down, etc. The articles will be based on personal experienceof the author. We shall personally invite Key Management Personnel in Public Administration, Public and PrivateEnterprises and Practicing Professionals to share their knowledge with the CMA fraternity.

It is also proposed to organize an Essay Competition for students and members, separately, on COSTMANAGEMENT KEY TO SURVIVAL IN CURRENT GLOBAL MELTDOWN. We shall publish details of the EssayCompetition in the next issue of the Management Accountant.

Current Economic Meltdown has exposed weaknesses of many economic principles and financial managementsystems and practices. New theories are being developed for economic management all over the world. It is desired toundertake basic research in new areas so far unheard of, whether in public fiscal management or for private enterprises.We invite proposals from academicians, professionals and students for research work in fields related to the professionaldevelopment for Cost and Management Accountants. The research scholars will be suitably rewarded for their efforts.

Please volunteer for your interest in any of the above proposals by writing to:

Ms. Anamika Mukherjee,Deputy Director (Research and Journal),The Institute of Cost and Works Accountants of India,12, Sudder Street,Kolkata - 700 016Email: [email protected]

You are welcome to write to me also if you have any views to share with me.

With best regards to all,

CMA V.C. KOTHARIAugust 24, 2009


OBITUARY

We inform with a heavy heart the sudden demise of 24th president of ICWAI, Shri A.VenkataRamana Rao in New Delhi on August 4th, 2009. We at ICWAI pray for peace of the departedsoul and that his family has the strength to bear the irreparable loss.

— From the Business Standard

‘We want to be equated withchartered accountants’Q&A

A priority areaof the newpresident ofthe Institute ofCost and

Works Accountants of India(ICWAI), GNVenkataraman, is to makethe institute more visible. Inan interview with SapnaDogra Singh, he said ICWAIwould also lobby with thegovernment to accept therecommendations of theexpert group on wideningthe scope of cost audit byincluding more companiesand sectors. Edited excerpts:

What are your priorityareas for the year?To provide more visibility to theinstitute and the profession ofcost accounting would be mytopmost priority. Anotherimportant area would be to pushforward the expert committee’srecommendations on wideningthe area of cost audit beyond 44industries and products. Theinstitute would pursue these withthe government.

What are the mainrecommendations of theexpert group?

All manufacturing companieswith a paid-up capital of Rs. 50crore or more will be requiredto conduct a statutory costaudit, which would bring about25,000 firms under the ambit ofcost audit. At present, only 44industries and specific productswithin an industry come undercost audit.

The proposed change willhave a major positive impacton the profession, because morefirms will have to manda-torily appoint a cost auditor andhave cost accounting recordsaudited on an annual basis. Atpresent, about 1,800 costaccountingt professionals practisein India, against 46,000 qualifiedpeople.

Which sectors has theexpert grouprecommended for costaudit?Except agriculture, it has recom-mended that all sectors be cov-ered.

Do you see it happening inyour tenure?It is a process and there are cer-tain things that need to donefrom the institute. I would beappointing a separate commit-tee to oversee and implementsome of the recommendationswhich don’t need the ministry ofcorporate affairs’ approval. En-terprise governance is one sucharea where cost audit and costrecords have to be redefined, butthis would be done without bur-dening the industry with all kindsof formats. The Institute wouldalso bring our cost accountingstandards as recommended by theexpert group.

How many cost accountingstandards would ICWAI comeout with this year?Of 39 cost accounting standards,six are already out and anotherfive are on anvil, awaiting Coun-cil approval. Work on the re-

maining 28 would follow soon andin a couple of years, all standardswould be issued. And till thesecome, there are generally ac-cepted cost accounting standardsto fill the gap.

What about the change ofthe name of the Institutethat your predecessorshave been demanding?Yes, we are pressing for the nameof the Institute to be changed toInstitute of Cost and Manage-ment Accounting and we havebeen told it is under process.

ICWAI has objected to theamendment of Section 14Aand Section 14AA of theCentral Excise Act in theFinance Bill 2009.We have asked the governmentto equate cost accountants withchartered accountants byrecognising them under the defi-nition of ‘accountants’ underSection 288 of the Income TaxAct. We are equally qualified andcompetent. Since we are special-ists in indirect tax, cost accoun-tants would be playing an impor-tant role when the GST (goods &services tax) would be imple-mented


I FAC PAIB office requested ICWAIto prepare a note on the implicationsof IFRS on historical cost

statements. The issue came up asICWAI took a stand in IFAC - PAIBmeeting that if cost statements aremade based on ledger balances whichare subject to IFRS the impact of fair

Implications of IFRS onHistorical Cost AccountingBalwinder Singh*A.N.Raman*

*Central Council Member of ICWAI

PROPERTY, PLANT & EQUIPMENT

1

IAS-16

Book Value of Property, Plant & Equipment If Revaluation Model is adopted: After recognition as an asset, an item of property, plant and equipment shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Depreciation The depreciation charge for a period is usually recognised in profit or loss. However, sometimes, the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the depreciation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories (see IAS 2).

Depreciation based on revaluated amount will affect cost of production. Moreover, Under IFRS regular revaluations are required, thus, depreciation is always based on latest value of property, plant & equipment. Any basis of depreciation selected for accounting (straight line method or written down value method or any other method) will give non-comparable figures as regular revaluations are being done. Cost of conversion of inventories will be affected (far away from historical cost) due to allocation of depreciation of manufacturing plant and machinery. Cost of Intangible Asset will be affected (far away from historical cost) due to

value estimates would have changedthe recorded transaction costs orhistorical costs. This may change theparadigm of historical costing. To studythis Mr Balwinder Singh and MrA.N.Raman , Central Council Memberswere assigned the responsibility byICWAI.

Four meetings were conducted atKolkata, Chennai , Mumbai and Delhiwith a small group of interestedprofessionals. Chennai meeting was ledby Mr T.P.Gosh with participation fromvarious experts, Kolkata meeting by ProfAsish Bhattacharyya of IIM Calcuttaand Mr S.C.Vasudeva at Delhi. Thesemeetings identified the following IAS/IFRS which through application of fairvalue concept contained in the ledgerbalances will vitiate the historical natureof costs compiled. The pointsexchanged on various standards aretabulated below :

Cover Feature


Similarly, depreciation of property, plant and equipment used for development activities may be included in the cost of an intangible asset recognised in accordance with IAS 38 Intangible Assets.

)allocation of depreciation of assets used in the development of intangible asset. This, in turn will affect cost of production also if the intangible asset is used (after development) in the production process.

2 IAS-16

Depreciation – Component wise Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. An entity allocates the amount initially recognised in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. For example, it may be appropriate to depreciate separately the airframe and engines of an aircraft.

This will affect allocation of depreciation of Plant & Machinery to costs of production. Presently, Cost Statements consider Asset wise depreciation allocation on various products rather than component wise depreciation.

3 IAS-16

Depreciable amount and depreciation period The depreciable amount of an asset shall be allocated on a systematic basis over its useful life. Depreciation method The depreciation method used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity.

Present day Cost Statements derive depreciation based on systematic basis over useful life, subject to minimum depreciation prescribed under Schedule XIV of the Companies Act, 1956.

4 IAS-16 Asset Retirement Obligation Measurement at recognition: asset dismantlement, removal and restoration costs The cost of an item of property, plant and equipment includes the costs of its dismantlement, removal or restoration, the obligation for which an entity incurs as a consequence of installing the item. Its cost also includes the costs of its dismantlement, removal or restoration, the obligation for which an entity incurs as a consequence of using the item during a particular period.

Recognising Asset Retirement Obligation as the cost of Property, Plant & Equipment will increase the cost and consequential increase in depreciation. Cost of conversion of inventories will be affected (far away from historical cost) due to allocation of depreciation of manufacturing plant and machinery.

5 IFRS-1 First-time Adoption of International Financial Reporting Standard Full retrospective application of All IFRS is required. There are certain relaxations while adopting IFRS for the First Time. This includes following:

Depreciation based on Fair Value will affect cost of production. Cost of conversion of inventories will be affected due to allocation of depreciation based on Fair

Cover Feature


An entity may elect to measure an item of property, plant and equipment at the date of transition to IFRSs at its fair value and use that fair value as its deemed cost at that date. A first-time adopter may elect to use a previous GAAP revaluation of an item of property, plant and equipment at, or before, the date of transition to IFRSs as deemed cost at the date of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to: (a) fair value; or (b) cost or depreciated cost under IFRSs, adjusted to reflect, for example, changes in a general or specific price index.

Value of manufacturing plant and machinery.

6 IAS-2 Net realisable value Inventories are carried at cost or net realisable value, whichever is lower. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, of the amount the inventories are expected to realise. Estimates of net realisable value also take into consideration the purpose for which the inventory is held.

Cost of production will be affected on considering balances from IFRS based financial records in the case of raw materials and work in progress.

7 IAS-2 Allocation of Fixed Overheads The allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the production facilities. Normal capacity is the production expected to be achieved on average over a number of periods or seasons under normal circumstances. Unallocated overheads are recognised as an expense in the period in which they are incurred. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production is decreased (re-computed based on actual production). In this case, there is no unallocated fixed overheads.

Considering different amount of allocation of fixed production overheads over different periods without any change in capacity installed therein, will lead to non-comparable cost of production over different periods of production.

8 IAS-2 Inventories at Replacement Value Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished

Considering inventories at net realisable value / Alternatively at replacement value will give different value of inventories in hand as compared to “Cost”.

Cover Feature


products exceeds net realisable value, the materials are written down to net realisable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realisable value.

INVENTORIES ON DEFERRED SETTLEMENT TERMS

9 IAS-2 An entity may purchase inventories on deferred settlement terms. When the arrangement effectively contains a financing element, that element, for example a difference between the purchase price for normal credit terms and the amount paid, is recognised as interest expense over the period of the financing.

The interest element is subjective and will lead to different cost of acquisition of inventories than the actual payment. This will affect cost of inventories and in turn cost of production.

10 IAS-19 Defined benefit plans may be unfunded, or they may be wholly or partly funded. The Standard requires an entity to: recognise a specified portion of the net cumulative actuarial gains and losses that exceed the greater of: (i) 10% of the present value of the defined benefit obligation (before deducting plan assets); and (ii) 10% of the fair value of any plan assets. The portion of actuarial gains and losses to be recognised for each defined benefit plan is the excess that fell outside the 10% 'corridor' at the end of the previous reporting period, divided by the expected average remaining working lives of the employees participating in that plan. In the long term, actuarial gains and losses may offset one another. Therefore, estimates of post-employment benefit obligations may be viewed as a range (or 'corridor') around the best estimate. An entity is permitted, but not required, to recognise actuarial gains and losses that fall within that range. This Standard requires an entity to recognise, as a minimum, a specified portion of the actuarial gains and losses that fall outside a 'corridor' of plus or minus 10%.

Recognising “Employee benefits” (actuarial gains and losses) in excess of certain amount and not recognising certain amount will understate the amount of “Employee Benefits” {If Corridor Approach is used} Thus, Cost of conversion and in turn cost of production will be affected.

SHARE BASED PAYMENTS 11 IFRS-2 For equity-settled share-based payment

transactions, the entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity

Ascertaining the value of goods & services based on fair value of equity instruments will lead to inconsistent results. Fair value is subjective in nature and will vary from person to person. Cost of

Cover Feature


cannot estimate reliably the fair value of the goods or services received, the entity shall measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.

inventories and in turn cost of production will be affected.

12 IFRS-2 To apply the above, to transactions with employees and others providing similar services, the entity shall measure the fair value of the services received by reference to the fair value of the equity instruments granted, because typically it is not possible to estimate reliably the fair value of the services received,

Ascertaining the employee cost based on fair value of equity instruments will lead to inconsistent results. Fair value is subjective in nature and will vary from person to person. Cost of conversion and in turn cost of production will be affected. Similarly, cost of various services related to production process (overheads) will be affected leading to affect on cost of production.

13 IFRS-2 For cash-settled share-based payment transactions, the entity shall measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity shall remeasure the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.

Ascertaining the value of goods & services based on fair value of liability and in-turn re-measuring the liability at the end of reporting period will lead to inconsistent results. Fair value is subjective in nature and will vary from person to person. Cost of inventories and Cost of conversion (overheads) will be affected and in turn cost of production will be affected.

14 IFRS-2 For share-based payment transactions in which the terms of the arrangement provide either the entity or the counterparty with the choice of whether the entity settles the transaction in cash (or other assets) or by issuing equity instruments, the entity shall account for that transaction, or the components of that transaction, as a cash-settled share-based payment transaction if, and to the extent that, the entity has incurred a liability to settle in cash or other assets, or as an equity-settled share-based payment transaction if, and to the extent that, no such liability has been incurred.

Ascertaining the value of goods & services based on fair value of equity instrument / liability and in-turn re-measuring the liability at the end of reporting period will lead to inconsistent results. Fair value is subjective in nature and will vary from person to person. Cost of inventories and Cost of conversion (overheads) will be affected and in turn cost of production will be affected.

15 IFRS-2 For other transactions, including transactions with employees, the entity shall measure the fair value of the compound financial instrument at the measurement date, taking into account the

d di i hi h h i h h

Ascertaining the employee cost based on fair value of financial instruments will lead to inconsistent results. Fair value is

bj i i d ill

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terms and conditions on which the rights to cash or equity instruments were granted.

subjective in nature and will vary from person to person. Cost of conversion and in turn cost of production will be affected. Similarly, cost of various services related to production process (overheads) will be affected leading to affect on cost of production.

IMPAIRMENT LOSS 16 If the recoverable amount of an asset is less than

its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognised immediately in profit or loss, unless the asset is carried at revalued amount. After the recognition of an impairment loss, the depreciation (amortisation) charge for the asset shall be adjusted in future periods to allocate the asset's revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.

Impairment Loss is not considered as cost under the Cost Statements. Moreover, depreciation is based on carrying amount after impairment. Any basis of depreciation selected for accounting (straight line method or written down value method or any other method) will give non-comparable figures as carrying amount will change over different periods. Cost of conversion of inventories will be affected (far away from historical cost) due to allocation of depreciation of manufacturing plant and machinery.

INTANGIBLE ASSET 17 IAS-38 Training to Staff:

An entity may have a team of skilled staff and may be able to identify incremental staff skills leading to future economic benefits from training. The entity may also expect that the staff will continue to make their skills available to the entity. However, these items fails to meet the definition of an intangible asset as an entity usually has insufficient control over benefits. For a similar reason, specific management or technical talent is unlikely to meet the definition of an intangible asset, unless it is protected by legal rights to use it. In these cases, the expenditure is recognised as an expense when it is incurred.

Obtaining training expenses incurred on employees from IFRS based ledger balances and recording in Cost Statements will lead to incorrect cost results as all these expenses do not relate to a period in which these have been recorded in financial statements.

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18 IAS-38 In some cases, expenditure is incurred to provide future economic benefits to an entity, but no intangible asset or other asset is acquired or created that can be recognised. In these cases, the expenditure is recognised as an expense when it is incurred. For example, expenditure on research is recognised as an expense when it is incurred except when it forms part of a business combination. Other examples of expenditure that is recognised as an expense when it is incurred include: (a) expenditure on start-up activities (ie start-up costs), unless this expenditure is included in the cost of an item of property, plant and equipment. Start-up costs may consist of establishment costs such as legal and secretarial costs incurred in establishing a legal entity, expenditure to open a new facility or business (ie pre-opening costs) or expenditures for starting new operations or launching new products or processes (ie pre-operating costs). (b) expenditure on training activities. (c) expenditure on advertising and promotional activities. (d) expenditure on relocating or reorganising part or all of an entity.

Obtaining research expenses and other expenses (referred in left column) from IFRS based ledger balances and recording in Cost Statements will lead to incorrect cost results as all these expenses do not relate to a period in which these have been recorded in financial statements.

INTANGIBLE ASSETS 19 IAS-38 Amortisation of intangible assets (related to

production process) Recognition of Intangible Asset An entity shall choose either the cost model or the revaluation model as its accounting policy. Revaluation model: After initial recognition, an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. For the purpose of revaluations under this Standard, fair value shall be determined by reference to an active market. Revaluations shall be made with such regularity that at the end of the reporting period the carrying amount of the asset does not differ materially from its fair value.

Amortisation based on revaluated amount will affect cost of production. Moreover, Under IFRS regular revaluations are required, thus, amortisation is always based on latest value of property, plant & equipment. Any basis of amortisation selected for accounting will give non-comparable figures as regular revaluations are being done. Cost of conversion of inventories will be affected due to allocation of amortisation of intangible asset used in production process.

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20 IAS-38 Amortisation period and amortisation method The depreciable amount of an intangible asset with a finite useful life shall be allocated on a systematic basis over its useful life. Amortisation shall begin when the asset is available for use. Amortisation shall cease at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) The amortisation method used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity. If that pattern cannot be determined reliably, the straight-line method shall be used. The amortisation charge for each period shall be recognised in profit or loss unless this or another Standard permits or requires it to be included in the carrying amount of another asset. Amortisation is usually recognised in profit or loss. However, sometimes the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the amortisation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the amortisation of intangible assets used in a production process is included in the carrying amount of inventories.

Presently, amortisation is done based on systematic basis over useful life subject to maximum period of 10 years, generally. IFRS based allocation purely on useful life without restriction will affect present day cost statements.

INVESTMENT PROPERTY 21 IAS-40 Investment property is property (land or a

building—or part of a building—or both) held to earn rentals or for capital appreciation or both, rather than for: (a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business. Owner-occupied property is property held for use in the production or supply of goods or services or for administrative purposes. Fair value model After initial recognition, an entity that chooses the fair value model shall measure all of its investment property at fair value, except in the few cases specified in the Standard. The Investment property if transferred to owner-occupied property or inventories will be transferred at fair value to owner-occupied

In case of Construction business, the investment property (land or a building—or part of a building—or both) later on transferred to construction, the transfer is done at Fair Value. The cost of construction will get affected on considering the investment property (land or a building—or part of a building—or both) at Fair Value instead of Historical Cost. Similarly, in case of transfer to owner-owned property (i.e.-Property, Plant & Equipment for its own use), the transfer is done at Fair Value, which in turn will affect cost of production in case of depreciation on manufacturing

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BARTER TRANSACTION-ADVERTISING 22 SIC-31 An entity (Seller) may enter into a barter transaction

to provide advertising services in exchange for receiving advertising services from its customer (Customer). Advertisements may be displayed on the Internet or poster sites, broadcast on the television or radio, published in magazines or journals, or presented in another medium. In some cases, no cash or other consideration is exchanged between the entities. In some other cases, equal or approximately equal amounts of cash or other consideration are also exchanged. Revenue from a barter transaction involving advertising cannot be measured reliably at the fair value of advertising services received. However, a Seller can reliably measure revenue at the fair value of the advertising services it provides in a barter transaction, by reference only to non-barter transactions that involve similar advertising.

Cost of Advertising services obtained based on fair value of services provided is subjective and will affect determination of cost of advertisement.

CHANGES IN ACCOUNTINGESTIMATES 23 IAS-8 A change in accounting estimate is an adjustment of

the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors. (Para-36 of IAS): The effect of a change in an accounting estimate, other than a change to which paragraph 37 applies, shall be recognised prospectively by including it in profit or loss in: (a) the period of the change, if the change affects that period only; or (b) the period of the change and future periods, if the change affects both. (Para-37 of IAS): To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.

Effects of change in estimates, if recognised in Cost Statements will affect the Cost statements as these do not pertain to current activity but to already ascertained cost. (Computed on original ascertained and recognised items of expenditure, depreciation and amortisation)

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BOT CASES (BUILT, OPERATE & TRANSFER)

In some countries, governments have introduced contractual service arrangements to attract private sector participation in the development, financing, operation and maintenance of such infrastructure. The infrastructure may already exist, or may be constructed during the period of the service arrangement. An arrangement within the scope of this Interpretation typically involves a private sector entity (an operator) constructing the infrastructure used to provide the public service or upgrading it (for example, by increasing its capacity) and operating and maintaining that infrastructure for a specified period of time. The service arrangement contractually obliges the operator to provide the services to the public on behalf of the public sector entity. Other common feature include:

• the operator is obliged to hand over the infrastructure to the grantor in a specified condition at the end of the period of the arrangement, for little or no incremental consideration, irrespective of which party initially financed it.

24 IFRIC-12 If the operator is paid for the construction services partly by a financial asset and partly by an intangible asset it is necessary to account separately for each component of the operator's consideration. The consideration received or receivable for both components shall be recognised initially at the fair value of the consideration received or receivable. The grantor may also provide other items to the operator that the operator can keep or deal with as it wishes. If such assets form part of the consideration payable by the grantor for the services, they are recognised as assets of the operator, measured at fair value on initial recognition. The operator shall recognise a liability in respect of unfulfilled obligations it has assumed in exchange for the assets.

Recording of Asset, Infrastructure or Component at Fair Value ascertainment of cost based on that will vitiate the principle of Historical Cost.

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PEOPLE IN THE NEWS

Hearty congratulations to Shri Rakesh Sharma, member of our Institute on beingpromoted as Asst General Manager- Costing, MIS and Audit of Malwa IndustriesLtd., Ludhiana.

RETIREMENT

Our dear colleague at ICWAI, HQ, Kolkata, Shri Dilip Chakraborty has retired fromthe services of the Institute after a long and distinguished career on August 31, 2009.We at ICWAI, place on record, Shri Chakraborty's sincere and dedicated service tothe Institute and wish him good health and best wishes for all endeavors in the future.

INTERIM FINANCIAL REPORTING 25 IAS-34 Recognition and measurement

Same accounting policies as annual An entity shall apply the same accounting policies in its interim financial statements as are applied in its annual financial statements, except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements.

To the extent, Cost Statements are affected by using the date obtained from Annual financial statements, these shall also be affected to similar extent on using the date obtained from interim financial statements.

The summary implications of the discussions are as below :

l IFRS fair value affected expense balances can make serious impact on historical costing. This is true of manufacturingstandards like, employee costs, inventory valuation, depreciation, some intangible expenses etc.

l Regulated industries will have give misleading cost structure if cost statements are submitted on the basis of fair valueinfluenced IFRS.

l Board of directors should be told about the difference in profitability between historical cost structure based profitabilityand IFRS based.

l Due to the potential hazards all companies beyond a threshold limit should maintain profitability measured by costaccounting standards as a discipline whether coming under section 209(1)d) or not .

l It is very relevant like fertilisers wherein Govt decides subsidies based on historical cost structure.q

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Introduction

Packaging is the science, art andtechnology of enclosing orprotecting products for

distribution, storage, sale and use.Packaging, as defined by Kotler andKeller, refers to "all the activities ofdesigning and producing the containerfor a product". Packing cost includescorrugated container cost, protectivepackaging materials cost, protectivepackaging labour cost, overhead cost,return cost, replacement cost, shippingcost, repair cost, discard cost, insurancecost, opportunity cost, inventory cost,customer retention cost, bufferinventory cost.

Package labeling is any written,electronic, or graphic communicationson the packaging. Thus, packagingcontains, protects, preserves,transports, informs and sells. It is fullyintegrated into government, business,institutional and industry.

Packing can be classified intoprimary package, secondary packageand tertiary package depending on theuse. The container that holds theproduct is the primary package e.g.bottle, jar, tube, carton etc. Any outerwrappings that help to store, transport,inform display and protect the productare secondary packaging e.g. a gift box

Strategic Focus onPrimary and SecondaryPacking-Need for CostAccounting StandardsDr.C.Samuel Joseph*

*M.BA., FICWA.,Ph.D, Senior LecturerDepartment of Management Studies TheAmerican College, Madurai 625 019, E-mail:[email protected]

or a decorated carton etc. Tertiarypackaging is used to group productsfor storage and transportation. Thecorrugated, brown carton is the mostfamiliar. Large pallets of shrink-wrappedboxes are a common warehouse sightreflecting tertiary packaging. For anyproduct, packaging may be necessarydepending on the intended purpose.This section deals with the aboveclassifications. Packing cost forms asubstantial portion of the total cost andit is semi - fixed. The cost will dependon how much importance one give tosafety, aesthetics, handling, storage,etc. In addition, the nature of the costis controllable and as such a managedcost.

Objectives

1. The cost of packing material is themajor determinant of the cost of thefinal product. Eg. Wooden boxes,low density polyethylene (LDPE),poly bags, glass, bi-axially orientedpolypropylene (BOPP), polyester,cast polypropylene (CPP),thermocole etc. Thus costascertainment assumes a toppriority.

2. Primary purpose of packaging is toserve against damage during themovement of the product. Mostproducts have multiple levels ofpackaging. For eg. Centre fresh ispacked in a polyethylene wrapper(Primary package). These wrappedmouth fresheners are either packedin PET jars or poly bags (secondary

package). These jars/packages arethen packed in corrugated boxes(tertiary/shipping package). Each ofthese packages serves a differentpurpose. As there are wide spectrumof packing it becomes necessary todevelop cost accounting standardsfor ascertaining the cost of packingfrom safety of the products to itsstorage.

3. Package design and developmentare often thought of as an integralpart of the new productdevelopment process and henceclosely linked with the product tobe packaged. Cost accountingstandards need to be developed forcost ascertainment right from theidentification of all the requirements,like structural design, marketing,shelf life, quality assurance,logistics, legal, regulatory,environmental, etc. The resourcesand cost constraints need to beestablished and agreed upon.

4. Package design may take placewithin a company or with variousdegrees of external packageengineering, contract engineers,consultants, vendor evaluations,independent laboratories, contractpackagers, or total outsourcing. Aneffective cost ascertainment systemand verification and validationprotocols are mandatory andrecommended for all.

5. Package development involvesconsiderations for sustainability,environmental responsibility, andapplicable environmental recyclingregulations. Development ofsustainable packaging is an area ofconsiderable interest. Thus Costascertainment assumes significance.

6. Capital cost for carrying out theprocess of packing is anothervulnerable area which requires costascertainment. A choice ofpackaging machinery includes,technical capabilities, laborrequirements, worker safety,

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maintainability, serviceability,reliability, ability to integrate into thepackaging line, capital cost, floorspace, flexibility(change-over,materials etc,) throughput,efficiency, productivity, ergonomics,etc.

7. Shelf life, appeal, machinability andcompatibility are the most importantaspects in packing. A cost indexhas to be worked out withappropriate weightage byevaluating the performance of all thematerials.

Scope

The scope of cost accountingstandards may apply to all aspects fromproduct protection, handling andstorage, shipping and environmentalresponsibility. The above goals shouldbe balanced or optimized to achieve thelowest overall cost.

1. Cost accounting standards mayapply to the type of packing materialused.

2. Cost accounting standards mayapply to the treatment of incidentalcosts of acquisition of packingmaterials.

3. Cost accounting standards mayapply to the specific impact oftechnology, labour inputs,warehousing, shipping, structuraldesign, marketing, shelf life, qualityassurance, logistics, legal,regulatory, environmental, etc. Onin-house package designing anddevelopment.

4. An effective cost ascertainmentsystem, verification and validationprotocols are mandatory for totaloutsourcing the product packaging.

5. Cost accounting standards mayapply to ascertain the capital costof for carrying out the process ofpacking.

Principles

To design a package one must haveclear principles in mind. These will vary

with products, customers, distributionsystems, manufacturing facilities etc.As packaging should always beeconomical the following principles areworth considering in achieving thelowest overall cost.

1. Identify the Physical Characteristicsof the Product:

Product knowledge means morethan knowing simply its dimensions andweight. The package designer must beaware of surface characteristics andsusceptibility to abrasion or corrosion,the ability to hold a load incompression, internal characteristicsaffected by vibration, and particularlythe products fragility. Guessing aboutany of these factors will surely lead toescalation of costs.

2. Determine Marketing andDistribution Requirements

Cost ascertainment should take careof marketing and distribution requisitesin addition to product characteristics,the composition and attributes of theprimary package, the identity ofcustomers and their handling storagerequirements, the package disposalcriteria, total volume expected per shift/day/year, expected life cycle, theplanned modes of transport and typesof distribution channels.

3. Learn about the EnvironmentalHazards your products encounter

Knowledge of the distributionenvironment is the key to optimize thepacking cost. For instance, roughhandling, shock-in-transit, compressionin storage or in-transit, high humidityand water, temperature extremes etc., Allthese contribute to costs of packingand as such the nature of material needsto be spelt out for developing coststandards.

4. Consider Alternative Available inpackaging and unitizing:

There are many alternativesavailable for shipping containers,interior packaging, and unit loads.Comparing paper vs. plastic vs. wood

vs. metal is a good exercise to optimizethe cost of packing.

5. Develop the Methods of Packing

One must be aware of cost factorsand the appropriateness ofmechanizing or automating all or partof the operations. In addition thepremium paid towards insurance oneach and every item shipped dependson the method of packing.

Assignment of costs

The basis with which various costsare assigned will have to follow the costaccounting principles as follows:

Cost of Packing - Primary

i) Cost of Packing Material(Primary)- Actual. This can be ex-factory, F.O.Ror F.O.B price as the case may be

ii) Freight Inwards - Actual (If thepacking material is carried exclusively)

iii) Freight inwards - (If the materialis carried along with other materials).In such a case assignment of costsshould be,

a) By proportionate weight/volume/cubic/container

iv) Cost of design and use of thevoid filling material required to provideadequate protection to transport theproduct safely - Actual

v) Cost of direct labour wagesassociated with the particular selectedprotective void-fill material.

Cost of Packing - Secondary

i) Overhead cost - Those fixed costsassociated with shipping process,assignment will be on the basis ofnumber of employees engaged with theshipping process

ii) Inventory cost - both the space,labour and material cost associated withthe storage and replenishment ofpackaging materials - Actual

iii) Insurance cost -

a) actual of the premium paid oneach and every item shipped

b) If it is part of a comprehensive

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policy then the assignment of thepremium cost will be on the basis of theproportionate value insured

iv) Customer Retention cost - thecost per rupee spent per each buyingcustomer divided by the marketingbudget allotted to secure each of thosecustomers

v) Opportunity cost - the intangiblecost of doing non-revenue generatingactivity due to the unnecessary damageissues when using an inferior protectivepackaging material.

vi) Inspection cost -

a) If the packing done calls forcertification by inspection of a thirdparty - actual will be assigned

b) If the inspection is part of aroutine work then the cost will be onthe basis of time spent on inspection.

c) If the packaging work isoutsourced completely no separateinspection cost will be charged.

vii) Environment cost/special cost:Those costs associated to minimize theimpact of packing on the environment.Assignment of this cost will be on thebasis of the proportionate valueincurred.

viii) Adjustment has to be made forreturnable/reusable containers anddunnage

General:

1. Proper records shall be maintainedshowing the quantity and cost ofvarious packing materials such ascard board boxes/ wooden boxesused for packing different types ofproducts.

2. If the company manufactures suchpacking materials, proper recordshowing the cost of production ofsuch items shall also be maintained.Records shall also be maintainedshowing wages and other expensesincurred in respect of different typesand sizes of package adopted for.

3. When packing expenses areincurred in common the basis of

apportionment of such expensesamongst different types and sizesshould be equitable and clearlyindicated and applied consistently.

4. Separate records of specialexpenses incurred on a exportpacking in respect of different typesand sizes if any should bemaintained and exhibited in therelevant cost statements for exports.

5. Details of spoiled packing materialsshall be maintained in respect ofeach product.

6. Where any formulation is repackeddue to defective packing, details ofsuch packing for each formulationsize-pack wise shall be maintainedif repacking cost is significant.

Methods of Cost Savings in Primary& Secondary Packing:

Cost Savings can be generated inpackaging by following methods,

1. Shape and Size can be altered tomaximize the number of packets perbox with less packing material.

2. Thickness of packaging material canbe reduced like laminate, wrapper,tapes etc.,

3. Avoid excessive packaging likehaving over wraps on packedproducts

4. Printing can be reduced to minimumpanel size on primary as well as onsecondary packing.

5. Common packaging material for allthe locations with commoninformation.

Conclusion:

Therefore the role of packaging hasassumed a heightened significance overthe years. From being considered as anecessary element of protection, it hascarved its own niche as a strategicweapon. The role of packaging todayis not just restricted to a shelter for thecore product, but has grown manifoldas a promotional tool, means ofadvertising, and a platform for theconsumers to interact with the product.

Packaging, and not the product, isthe first touch-point that the customercomes into contact with. Thus, all theseabove aspects, which need to beconsidered in while ascertainingpacking cost. Hence developing an CostAccounting Standards for packingassumes greater significance.

References:

1. Paula Hook and Joe E.Heimlich, OhioState University Extension Fact Sheet,Community Development.

2. Walter Soroka, 2000, Fundamentals ofPackaging Technology, published byInstitute of Packaging Professionals.

3. Kenneth Berger, Agricultural andBiological Engineering Department,University of Florida Gainesville.

4. Bourque, R.A. (2003). "SecondaryPackaging." In Encyclopedia ofAgricultural, Food and BiologicalEngineering, D.R.Heldman, Ed, NewYork , Marcel Dekkar, pp.873-879.

5. Chinnan, M.S and D.S.Cha.(2003)."Primary Packaging". InEncyclopedia of Agricultural, Food andBiological Engineering D.R.Heldman Ed,New York, Marcel Dekkar, pp.781-784.

6. Hanlon,J.F., R.F. Kelsey and H.E.Forcinio. (1998). Handbook of Packageengineering, 3rd edition, Lancaster, PA.Technomic Publishing.

7. Steven, M.D. and J.H. Hotchkiss.(2003). "Package Functions". InEncyclopedia of Agricultural, Food andBiological Engineering D.R.Heldman Ed,New York, Marcel Dekkar, pp.716-719

8. Mihir Mukherjee, "Packaging costdetermined by raw materials cost":Competing downstreams helpsoptimize cost, Jan 21, 2008. SourcingInsights.

9. Lena Andersson, School of MechanicalEngineering Lund University, Sweden."What drives the customer's choice ofpackaging and which factors influencethe customer's packaging cost? - in theautomotive and manufacturingindustries.

10. Lectures in Packaging Logistics, MTT211, Peter Hartwall (Arca)q

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*AICWA

Customer Satisfaction and Value Additions are the two key factors which drivesthe company to achieve its objectives. It is vital and becomes more important fora outsourcing company to have a proper controls in place on its key inputs andits requirements so that its final deliverables doesn’t get affected. From the pointof service provider it becomes necessary to use some of the six sigma and leantools in its operation process so that each of its activities are tracked andmonitored and any fluctuations or deviations are identified and corrected thenand there itself. By having proper control on key inputs and any deviations inoutputs can be easily avoided. This will result in meeting customer satisfactionand also adding value to the business.

Customer Satisfaction andValue Additions in BusinessProcess Outsource (BPO)/Financial Service Industry –A study as to how to Measureand Monitor by using SixSigma and Lean tools

V alue addition and Customersatisfaction are key factorswhich drives the growth and

existence of Business ProcessOutsourcing (BPO) or Financial Serviceindustry. It becomes very important tounderstand in the modern businessenvironment that it is not only the costor economies of scale for which acompany outsources its business tothird party but, it also expects that theservice provider adds some value to itsexisting business. Value addition in thiscontext means that by outsourcing itsbusiness the company gets in return notonly the service as per the contractualterms but, also expects some valueaddition services in terms ofimprovement in their regular operations,lowering of risks and issues in theprocess, better management andcontrols within etc..

All these days service of BPO/Financial service industry wererestricted to contractual terms. Serviceproviders were serving the clientskeeping in mind the objectives ofachieving the Service Level Agreement(SLA) according to which they werepaid by clients. So, if they achieved SLAduring the period then they would bepaid according to terms and so it wasrather a straight business objectives, ifSLA is met they would be paid or otherwise they used to charge some servicecredit. So, the competition among theBPO/Financial service was based on thequotes for the contractual terms. Lowerthe cost of contractual terms there wasevery possibility to win the contract.As time passed the entire objectives ofBPO/Financial services has undergonea changed. Now, the expectation is thatin order to outsource the work to theservice provider it should get in return

for the satisfaction (meeting the SLA)some value additions to the businesswhich they operate. So. now it is notonly the customer satisfaction in termsof meeting contractual terms which theservice provider should try to achievebut, it should also work towards addingvalue to the business so that more andmore additional work follows.Advantage of Value Additions to Clients

Below are the advantages whicharise to the clients as a result of valueaddition generated from outsourcingthe business to service providers-l Identify the process risk which is

internal to operationsl Re-engineering or Re-designing the

existing process to make it morerobust and efficient.

l Applying the learning's to otherareas of operation.

l Brining in more and more internalcontrols so that time and cost issaved to great extent.

Advantage of Value Additions toService providers

Below are some of the advantageswhich a service providers gain byadding value to the clients process -l Clients happy with service may go

a head with the plan for outsourcingmore and more business which werenot part of initial contract.

l Satisfied client acts as a goodreference to prospect clients.

l Happy with satisfied service theclient may compromise on some ofcritical targets and cooperate withthe service providers in achievingthose with out any service creditscharges for not meeting targets.

l Extending of contract terms.l Extra revenue for successfully

implementing value addition ideassuggested by service providers.

l Value addition can act as bestpractice ideas for other companywhich does similar and identical typeof business.

How to achieve maximum customersatisfaction and Value additions?

After studying the advantages of

N. Raveendranath Kaushik*

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value additions now the question whicharises is how to achieve maximumcustomer satisfaction and valueadditions? Is there any well definedtools and techniques which serviceprovider should use in order to increasecustomer satisfaction and bring valueadditions? Is it a difficult, timeconsuming, costly to measure customersatisfaction and value additions? Theanswer to all these questions is that itis easy to measure customer satisfactionand also it is easy to find the areas wherevalue additions can be brought in theprocess. It doesn't require any extra costor manhours for doing so, it is onlythrough use of Six Sigma and Leantechnique one can make the processmore stabilized and can measure theperformance to great extent. Six Sigmaand Lean concept

Briefly speaking Six Sigma is astatistical and problem solvingmethodology that is focused onvariation and defect reductions. A Leansystem emphasizes the prevention ofwaste, any extra time, labour or materialspent producing a product or servicethat doesn't add value to it. Usually, theapplication of Six Sigma and Leanconcept is more applicable inmanufacturing industry but, theconcepts on which they work can alsobe used in Service industry in order toachieve the fruitful results.BPO/Financial Service industry anduse of Six Sigma and Lean concepts

Now, let us study on how we canuse the tools and concepts of Six Sigmaand Lean in BPO/Financial Serviceindustry so that it helps in increasingcustomer satisfaction and valueadditions. Here, it becomes importantthat at time of transitioning the workfrom the clients and before go live ofthe process a well structured end to endprocess maps should be created andcommon problems areas are to beidentified. Identification of problemareas helps in having a macro look atthe process and developing a strategyto counter the problem areas at initialstage of go live. This is some whatproactively identifying the problemareas and planning accordingly so that

it will not affect the service delivery attime of go live. The clock of customersatisfaction starts from the day theproject go live and it is very crucial towin over the customer at initial stagesof delivery of output. Expectations byclients will be high and so it will be veryimportant as a service provider thatservice delivery doesn’t hamper theexpectations and dream of customer atinitial stages. By using some of the toolsand techniques of Six Sigma and lean aprocess can be measured to a minutestextent and there by controls can beframed at initial stages and by doing soone can avoid the dangers of processfailures. There are certain steps whichshould be followed which are discussedbelow which will lead to step by stepimplementation of Six Sigma and leanconcepts in the process measurement -Steps in process monitoring andmeasurement — using of Six Sigmaand LeanI) Process Dcfnition

The first and foremost step is toidentify the different process in the mainprocess and start breaking the processin to smaller and smaller units. Whilebreaking entire process in to smalleractivity, one should also identify thekey inputs and its requirement and thefinal output and its requirements. Thisprocess will help in identifying broadlyabout who are the suppliers, what is theresults, what are different activities inprocess, what are the key inputs and itsrequirements, what is to be done in theprocess and ,what is our output and itsrequirements. So, ones we are clear withthe supplier,inputs,process and outputsthen it will be important to know whichare the controllable factors which wehave control over it and those whichare not under over control. The onewhich is under over control can be takencare by us but, the one which is notunder our control meaning those forwhich clients are responsible for whichwe have an option to bring valueadditions should be clearly identifiedfor each of input and outputs. It is alsonecessary that the activities in theprocess for which the delivery centre

(i.e service provider) is responsible andaccountable and for which client isaccountable and responsible should betracked in a matrix.II) Identifying key inputs which

impacts outputsOnes the process is defined through

process maps (high level and detailedlevel) the next step is to identify keyinputs in the process activites whichhas an impact on the final key outputs(client driven SLA or internal targets).It will be better if this can be definedwith some weights because the matrixderived based on weights will showeasily the key inputs and output whichshould be targeted. Higher the weightsit means very critical and one shouldensure that they take necessaryprecaution and action to control thoseinputs. The basic idea here is to firstcontrol inputs where problem arises sothat it takes care of automaticallycontrolling the output.III) Identifcation of risk in process and

framing a control process tomitigate riskThis is one of the important steps

and here we find out the risk inherent inthe process. This can be identified byanalyzing each and every activity orprocess steps which is drilled down fromthe main process. Each process steps isbroken down based on following -

Severity It shows how severe theprocess activity on the final output.Weights from 1 to 10 are assigned whichmeans 1 - low severity and 10- mostsever. Each input activity is measuredon the scale of 1 to 10 according toseverity. Higher the severity it is mostcritical and this required specialattention so that not having control onit will impact the output.

Occurrence It shows the potentialcauses of failure. Chances of failureoccurring in the process if the input isnot controlled should be depicted.Weights starting from 1 to 5 areassigned wherein 1 means probabilityof least occurrence and 5 meansoccurrence is more frequent.

Detection It shows how fast wecan detect the defects in the process.

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Weights from 1 to 10 are assigned whichmeans, 1 easily identifiable and 10 ismost difficult to identify.

Ones input activity is assigned withweights based on Serverity,Occuranceand Detection the next step is tocalculate the Risk Priority Number(RPN) which is calculated bymultiplying weights of input activity.The process step which has higher RPNis the one which needs to be targetedand an action plan needs to be definedin order to reduce RPN. Severity remainssame but, it is only occurrence anddetection of defects which under gochange after implementing the actionplan. A good operation review shouldmonitor the operations based on RPNand make sure that suitable action plansare implemented for those inputactivities which have high RPN andthere by ensure that RPN is reduced (byfrequent monitoring) in order to have asmooth and clear output.IV) Controlling the process through a

well defined control planOnes the process risk is identified

and steps are taken to mitigate the risk,it becomes important to place a controlon the process so that these type ofrisk will not arise again and again. Thiscan be done by preparing a detailedcontrol plan in which the various inputsand output metrics are identified fromthe process, documents and processrisk activity. Here, a detailed plan isformulated and also the action pointsfor each of critical input activity basedon productivity, cost, cycletime, volumeetc are identified and measured. A detailplan showing the responsibility andtime frame by which the control plan isto be implemented is tracked. Thesecontrol plans are frequently visitedpreferably ones in a month and it isreviewed with the results and progressdone.V) Measuring the performance of the

process (Input and Output)Ones the controls are in place the

next important step is to measure theperformance. After identifying theprocess risk areas and process activitieswhich has maximum impact on the

output, next step is to have ameasurement in place and monitoringthe same so that there is no furtherdeviation in input activity. Key inputand output metrics should be definedand accordingly metric tracking shouldbe done on daily, weekly and monthlybasis according to the importance ofidentifying the risk and criticality onoutput. It is important to note here thatdata points are captured based oncriticality, if the inputs are very criticalthen it is better we track it on weeklybasis so that any variation in inputs canbe identified immediately and actiontaken accordingly. Control charts areone of the important technique by whichwe can identify the variations in theprocess. Control charts are derived bycalculating Mean and Standarddeviations. Upper control limit (UCL)which is 3+ Standard deviation showsthe upper control limit within which thedata point should exist. If any data pointfalls above UCL then it is a seriousconcern and it is time to analyse reasonsfor deviations and to take necessaryaction. Similarly, there is Lower controllimit (LCL) which is 3-Standarddeviation, which shows that lowestcontrol limit within which the data pointcan vary/fluctuate. If the data point isbelow the LCL then it is also a area ofconcern which needs to be looked into. There is also a mean which is plottedon the control chart and the ultimateobjective is to make sure that meancoincides with the ultimate objectives,which is meeting targets. Anyfluctuation of data points with in theUCL, LCL and Means then thevariations need to be identified andthose days details need to be studiedon why there was fluctuation. Here, it isimportant to identify the reasons forvariations. Usually, variations can bedue to Special and General Cause.Special causes are those which are notunder the control of management (likegeneral strike, natural disaster etc.) andGeneral causes may be some thing likesoftware break down, head countproblem etc. which has occurred duringthat period. It is important that General

causes are identified and control plansare drafted and implemented so that ageneral cause does not have impact onthe final output.VI) Sharing the performance with the

teamThe last and final step is to make

sure that the performance results areshared with the team members onregular basis. This is one of theimportant steps as it is a forum throughwhich the performance are shared withthe people who actually contributetowards achieving the targets. There aredifferent forums and ways of sharingthe performance in process amongwhich the important are -l Regular team meetings, interaction

and day to day activity plan at thetime of commencement of shift.

l Displaying of charts, targets andactual for the day, number ofabsenteeism for the day and activityplanning, weekly performancetrend, control points etc.

l Frequent review and monitoring theperformance by quality team andalso reviewing the action points asdefined under risk analysis so thatrisk gets mitigated and also toestablish that there is a propercontrol on the key input activity.

ConclusionOnes a proper control is developed

for key inputs and risk areas aremitigated then it is sure that resultingoutput will be 100% accurate. Meetingconsistent target and identifying riskareas in the process will help in meetingcustomer satisfaction and also guidesclients in brining changes in the way ofoperations where ever it is applicable.It also leads to setting up of a businessculture where by the client can makeuse in other areas of operation. Clientswill get a strong feeling and itsconfidence level goes up and will thinkof outsourcing its other areas ofoperation. By having a strongmeasuring and monitoring techniqueson key inputs and their failures a serviceprovider can add value to the businessand also can improve upon customersatisfaction.q

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A Review of Literature onLife Cycle CostingS. Aravanan*P. Sivasakkaravarthi**

*Selection Grade Lecturer in Commerce,Department of Commerce, PondicherryUniversity, Puducherry-605 014. e-mail:[email protected]**M. Phil. Scholar in Commerce,Department of Commerce, PondicherryUniversity, Puducherry- 605014.1Yoshio Kawauchi and Marvin Rausand,"Life Cycle Cost (LCC) analysis in oil andchemical process industries" June, 1999.

Introduction:

L ife cycle cost(LCC) analysis is aconcept of cost accounting, aform of management accounting,

which became popular in the 1960s,when the concept was taken up by

US government agencies as aninstrument to improve the costeffectiveness of equipment procure-ment. In the 1960's US department ofdefence started to assess the long termcost effect of products when makingpurchase decision. Most of themethodologies developed by the USDefence Department were onlyintended for procurement purposes. Tillthe beginning of 1980s the LCC analysiswas mainly applied for military field.From that point, the concept has spreadto the business sector, and is used therein management accounting, particularlynew product development studies andproject evaluations. After that period,the applications of LCC analysis havespread to other industries such asaircraft, electrical power plants, oil andchemical industries, and railwaysystems.

Meaning and Definition of Life cyclecosting

Life Cycle Costing (LCC) is a young

concept in the field of accounting. LCCalso called Whole Life Costing is atechnique to establish the total cost ofownership. It is a structured approachthat addresses all the elements of thiscost and can be used to produce aspend profile of the product or serviceover its anticipated life-span. LCC isthe accumulation of costs for activitiesthat occur over the entire life cycle of aproduct, from inception to abandon-ment by the manufacturer and consumer.Thus rightly it is some times called as a"cradle-to-grave cost" or "Womb-to-Tomb" cost. LCC analysis provides aframework for managing the cost andperformance of the product over theduration of its life. The results of an LCCanalysis can be used to assistmanagement in the decision - makingprocess when there is a choice ofoptions.

A Review of Literature on Life CycleCosting

In this article a review of literatureavailable on Life Cycle Costing is done.

A systematic review of literature isan unbiased collection of all the dataon a given topic and a critical appraisaland synthesis of this information. Athorough review of existing literature ona given subject matter creates a firmfoundation for advancing knowledge onthe subject. With this end in view anextensive review of literature pertainingto LCC is done. The review is dividedinto two parts:2HM treasury Guidance on Life cyclecosting, April 1992.3Calbie Berliner a djames A. Brimson, costmanagement for today's advancedmanufacturing, 1988, P.241.

(i) Review of general studies doneon Life Cycle Costing

(ii) Review of special surveys/project conducted on the application ofLife Cycle Costing and Guidelinesissued on Life Cycle Costing.

Review of general studies

In this section a review of 29 studiesis given.

Harold E. Marshall and Rosalie T.Ruegg1 in February 1977 conducted astudy on Energy Conservation throughLife-Cycle Costing. In their study theydescribed the state of the art techniquesfor measuring life cycle savings ofenergy conserving approaches tobuilding design. Application of LCCanalysis and the results of applyingsuch analysis to energy conservationproblems have been described forretrofitting conventional heatingcooling systems and for developingenergy conservation standards for newbuildings. One might conclude form thisarticle that architects have only to applyLCC analysis to all design decisions todetermine the most efficient allocationof resources for energy conservationin building. Theoretically this is true,and the authors feel convinced that abroder awareness of LCC techniques inthe architectural profession will in factlead to greater economic efficiency inthe use of energy conservation designsfor buildings. Impediments to universalapplication of these techniques do existhowever, and it will be helpful to thepracticing architect to know what theyare.

Taylor W, B2, in the year 1981undertook a study on assets. His paperexamines the concept of life cyclecosting and explains what is involvedin the use of the technique. It relatesthe subject to asset management andparticularly to the costs of physicalasset ownership. It emphasizes the lifecycle aspect of physical assetmanagement and underlines the valuesof trade off between initial running,operating and disposal costs. It outlines

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a methodology for the introduction ofthe technique, though allowing that thetechnique may be applied piecemeal.The paper includes a case studyillustrating the significance of life cyclecosting.

Yosef S Sherif and William JKolarik 3 in the year 1981 conducted astudy on Life cycle costing: Conceptand practice. This paper traces thedevelopment of the life cycle costing(LCC) technique in the United Statesand classifies documented LCCliterature by both model type andapplication. Literature in the fieldsupports the idea that the LCC concepthas evolved over the years to includefacets of system effectiveness inaddition to costs. It is also evident thatLCC has developed more as a result ofspecific applications rather thanhypothetical models. General systemcharacteristics which contribute to thesuccess of the LCC technique are alsoidentified

Yosef S. Sherif4 in May 1982undertook a study on an optimalmaintenance model for life cycle costinganalysis. His paper outlines the optimalmaintenance schedule that minimizesthe system's future total expectedmaintenance cost. This minimummaintenance cost may be added toresearch and development costs,operation costs and salvage costs toobtain the total life cycle cost of thesystem. The case in which the systemhas constant failure rate is investigatedunder imperfect inspection policy.

Klaus L. Wubbenhorst5 in August1986 undertook a study on Life cyclecosting for construction projects. Theauthor discusses the concept of lifecycle costing a valuable tool in an eraof economic depression and highinflation. He points out the problems inthe initiation of the process, theplanning, realization, operation anddisposal of complex systems. Hedescribes the objectives of life cyclecosting and presents a comprehensive

way to apply it.

Asiedu and GU and Fabrycky andBlanchard6, in the year 1991conducteda study on Life- Cycle Cost andEconomic Analysis. In this study theyhighlighted: in researching life-cyclecosting and interviewing experts in thefield, it is important that a consistentdefinition is used as to make sure eachof the respondents interpret thequestions the same way. No exactdefinition has been agreed upon forlifecycle costing amongst experts in thefield. This paper provides a conceptualframework for design andimplementation of a life-cycle costmanagement system. The life-cycle iscondensed into two major phases. Theacquisition phase includes the activitiesfrom research and development, design,up to the installation of the system. Theoperation phase includes the activitiesduring the actual use of the system.

R. GARY HICKS, and JON A.EPPS, PE7 in the year 1994 conducted astudy on life cycle cost analysis ofasphalt- rubber paving materials. Intheir study they highlighted:

l A brief history of asphalt rubber useand cost information

l A description of the life cycle costprocess used in this paper

l Comparative results to evaluate theLCC for hot-mix structural overlays,nonstructural surface courses, andchip seals containing conventional(or polymer modified) binders withsimilar applications containingasphalt rubber binders.

The findings indicate asphaltrubber is cost effective in many of theapplications used by local agencies inArizona and California. However, thereader should be aware that theestimated lives are based on interviewsand on engineering judgment. Changesin the life estimates could affect the finalconclusions.

J. Infrastruct. Syst8. in March 1996conducted a study on Life-Cycle

Costing in Municipal ConstructionProject in his study he highlighted: Theobjective of life-cycle costing (LCC)analysis is to optimize the total cost ofownership over the life span of an asset.A survey was conducted in the earlymonths of 1995 of the largestmunicipalities in the U.S. to investigatethe use of LCC analysis. The surveyindicated that 40% of the municipalitiesuse LCC analysis and that some hadbeen using it for over 20 years. Thereasons why 60% of the municipalitiesdid not use LCC analysis include lackof formal guidelines and the difficultyof estimating future costs and incomes.Other aspects of the survey includedthe typical profile of the LCC analysisprocess including project types, workcategories, and project stages. Thecriteria used in selecting projects forLCC implementation appear to bearbitrary. Finally, most municipalitiesassessed their LCC analysis process asa successful or a somewhat successfuloperation.

Aouad, G, Mari, F, Child, T,Brandon and P & Kawooya9 in the year1996 conducted a study on thedevelopment of an integrated life cyclecosting model. In their study theyhighlighted an approach to theintegration of design, construction andmaintenance data. The proposed modeluses the state of art technologies,namely Virtual Reality (VR) and objectorientation. The life cycle costing modelwill ensure that design is given a holisticpicture that will result in bettermanagement of facilities. Life cyclecosting information once inserted intothe design model will allow a clearerpicture of the maintenance data to bedisplayed in a VR environment. Thesystem is still under development.However, once it is fully developed itwill offer many opportunities formaintenance and cost engineers.

Per Dahlén and Gunnar SBolmsjo10 in December 1996 conducteda study on Life-cycle cost analysis of

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the labor factor. In their study theyhighlighted: The purpose of this paperis to widen the field of application forlife-cycle costing and carry through ananalysis of investments done whenraising the production factor labor in aSwedish engineering company. Theanalysis covers the costs for anemployee over the whole employmentcycle - from the recruitment untilretirement. The costs for labor aresuggested to be graphed in a waysimilar to the costs over the life cyclefor production equipment. The costsare divided into three basic categories:Employment costs, Operation costs andWork environmental costs

Woodward, D. G.11 in the year 1997undertook a study on Life cycle costing-theory, information acquisition andapplication. Life cycle costing is notlimited to forecasting of future costs inthe beginning of a life cycle. Regardingthe control of the whole life costs, it isessential that the costs be monitoredthroughout the life cycle. The focus ofLCC changes during the product's lifecycle. At the beginning of life cycle,LCC is mainly estimating of future costs.Over time, the focus of LCC shifts tomonitoring the incurred costs.

James Walls III and Michael R.Smith12 In September 1998 undertooka study on Interim Technical Bulletinrecommends procedures for conductingLife-Cycle Cost Analysis. The Bulletinbegins with a discussion of the broadfundamental principles involved in anLCCA. It discusses input parametersand presents simple examples oftraditional LCCA in a pavement designsetting. It discusses the variability andinherent uncertainty associated withinput parameters, and providesrecommendation on acceptable rangesfor the value of time as well as discountrates.

It explores the use of sensitivityanalysis in traditional LCCAapproaches given the power andsophistication of today's computers and

software. Simulation techniques suchas Monte Carlo are recommended forincorporating variability associatedwith LCCA inputs into final results.

Yoshio KAWAUCHI and MarvinRAUSAND13, in June, 1999 conducteda study on Life Cycle Cost (LCC)analysis in oil and chemical processindustries. The study report presentsbrief history and a state-of-the-artsurvey of Life Cycle Cost (LCC)analysis, in general and in particularLCC analysis in oil and chemicalindustries based on a detailed literaturesurvey, internet-web browsing, andinterviews with experts. This reportpresents a LCC procedure consistingof six steps, which are "Problemdefinition", "Cost elements definition","System modeling", "Data collection","Cost profile development", and"Evaluation". Sub-activities to beencompassed in the six step procedureare described. This report also presentscodes and standards related to LCCanalysis and software tools for LCCanalysis. Appendices include a list ofreferences, samples of cost breakdownstructure, and descriptions of softwaretools for RAM analysis.

Katile Amelio and Martha G.vangeem14 in the year 2000 undertook astudy on life cycle cost literature surveyand database. The study highlighted:Life cycle cost analysis is currently avaluable tool in the constructionindustry and will become more so asresources become more scarce.Selecting the materials and componentsof structures and pavements based ona life cycle cost analysis cansignificantly decrease the lifetime costof construction, maintenance and repair.

This literature survey gathers lifecycle cost information for concrete andcompeting materials from a variety ofsources, summarizes the results, anddescribes the resulting searchabledatabase. The database is a resourcefultool for those who would like to obtainadditional information on life cycle cost

analysis and results.

Jay Goldbaum15 in March 2000conducted a study on Life Cycle CostAnalysis State-of-the-Practice. Hisstudy report provides an outline for theengineer seeking to conduct a Life-Cycle Cost Analysis (LCCA) inpavement design and selection. Theguidance, recommendations, anddefault values provided here werecollected from 10 years of pavingprojects. Most of these projects wereconstructed or rehabilitated in the mid1980's in order to evaluate the currentdesign and construction practices in theState of Colorado. At this time, Coloradodepartment of transport uses adeterministic approach to the LCCA andis researching the move toward aprobabilistic LCCA. It is recommendedthat this report be used as a guide inthe pavement design and selection untildata can be collected and evaluated onasphalt pavements designed andconstructed using the Supepavetechnology

Asiedu & GU 1998 andEmblemsvag16 in the year 2001conducted a study on Activity-basedlife-cycle costing Product life cycle costanalysis. They highlighted: There aremany challenges in life cycle costing.First of all, forecasting of future costsis always inexact, so the calculationsare based on information which to someextent includes factors of uncertainty.Because of the inadequacies ofcompanies' costing practices,monitoring of costs during the life cycleis not accurate enough and there is notenough information for the successfulapplication of life cycle costing. Manybarriers to utilizing approaches basedon life cycle thinking have beenrecognized, such as inadequate costingdata, non-uniform costing practices andsuspicious attitudes towards theapproaches .It seems that adoption ofapplications based on life cycle thinkinghas been very slow on the practicallevel, except for a couple of industries,

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such as the military sector andconstruction industry.

Vestal Tutterow and GunnarHovstadius, Aimee McKane17 in the year2002 conducted a study on Life CycleCosting for Industrial Pumping SystemsIn their study they highlighted:Industries worldwide depend uponpumping systems for their dailyoperation. These systems account fornearly 20% of the world's industrialelectrical energy demand and range from25-50% of the energy usage in certainindustrial plant operations. Purchasedecisions for a pump and its relatedsystem components are typically basedupon a low bid, rather than the cost tooperate the system over its lifetime.Additionally, plant facilities personnelare typically focused on maintainingexisting pumping system reliabilityrather than optimizing the systems forbest energy efficiency. To ensure thelowest energy and maintenance costs,equipment life, and other benefits, thesystems components must be carefullymatched to each other, and remain sothroughout their working lives.

Yehoshua Liebermann and MeyerUngar18 in December 2002 conducted astudy on Efficiency of consumerintertemporal choice under life cyclecost conditions In his study hehighlighted: This paper presents aconceptual framework for analyzingconsumer LCC decision making. Withinthis framework the notion of choiceefficiency is highlighted. The maincontribution of the study is the directestimation of consumers' choiceefficiency, as compared to previousstudies that estimate only consumers'implicit discount rates. Effects ofsituational and personal variables onefficiency of choice are estimated bymeans of a series of manipulated choicesettings. The main empirical findingsshow situational effects of monetarysize, type of object and time horizon.Additional findings show the effect ofpersonal variables such as gender,

marital status and education.

Nick Bakis, Mike Kagiouglou,Ghassan Aouad and DalanthiAmaratunga19in the year 2003conducted a study on An IntegratedEnvironment for Life Cycle Costing inConstruction. In their study theyhighlighted: Life Cycle Costing (LCC)has become increasingly important inconstruction over the last few years.However, despite its importance, it hasfound limited application so far. Two ofthe main barriers in its application arethe shortage of LCC data and thecomplexity of the technique itself. Thispaper presents a computer-integratedenvironment, which aims to overcomethose barriers by providing aframework/mechanism for collectingand storing the LCC data and a numberof tools for assisting and simplifyingthe application of the technique. Themain characteristic of the environmentis that it provides a holistic approach toLife Cycle Costing by integrating thecollection of the data and the LCC-awaredesign and management of buildingswithin a single framework. A database,which is flexible enough toaccommodate the needs of any user, isused to store the LCC data. Anintegrated and interactive design toolis used to assist and simplify the LCC-aware design of buildings. A three-dimensional visualization tool is usedto assist the facilities manager in theLCC-aware management of buildings.Information collected from eachbuilding is fed back into the system toupdate the existing LCC data.

Dr. Kaan Ozbay, Dr. Neville A.Parker, Dima Jawad and SajjadHussain20 in July 2003 conducted astudy on Guidelines for Life Cycle. Thisstudy through research establishes theguidelines for conducting LCCA. Mostof the LCCA input parameters areinherently uncertain, such as thediscount rate, the analysis period, andthe type and timing of futurerehabilitation activities that will take

place in each of the life cycle options.In order to conduct LCCA in a reliableand trustworthy manner, a thoroughunderstanding of the theoreticalengineering and economicsbackground must be acquired. Thestudy report starts by setting LCCA inits broad perspective. It reviews theeconomic theory of LCCA, discussesthe types and levels of analysis inproject evaluation, and briefly goesover the historical background of LCCA.Towards the end, the report discussesa distinct application of LCCA inmonitoring contractor's pay schedule.The LCCA guidelines, presented in thisreport, aim mainly at providing thereader with sufficient knowledge onhow to perform LCCA, how to estimateits input parameters, and how tointerpret its results.

Anni Lindholm and Petri Suomala21

in the year 2004 conducted a study on -The Possibilities of Life Cycle Costingin Outsourcing Decision Making. Theaim of this paper is to discuss thepossibilities of life cycle costing inoutsourcing decision making andcompanies' ability to accomplishcomprehensive cost assessments on thebasis of empirical evidence about thepresent practices of life cycle costing.The study indicates that decisions arerarely made within a long-termperspective and cost consciousness incompanies is often quite poor. Becausethe field of life cycle costing isproblematic for many reasons, its usehas been limited on the practical level.However, LCC has good alignment withoutsourcing objectives and it is apotential tool for outsourcing decisionmaking.

KensetsukonasarutantsukyoKinkishibu 22 conducted a study in April2004 entitled: Method to apply life-cycle-costing to planning and design. In hisstudy he highlights the research resultsof life-cycle-costing of infrastructures.This research was performed by TheResearch Committee on Life-cycle-

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costing for three years from April, 2001to March, 2004. Its objective was tostudy the basic concept of life-cycle-costing and its application to actualdesign and maintenance planning. TheCommittee was composed of thirty-twomembers and three working groups(WG) were established.

Their research results were reportedgroup by group in this report. Theresearch themes of each group are asfollows: The first WG's study was onordering system in terms of life-cycle-costing (review of conventional system,proposal of LCC system, etc.), thesecond WG’s study was on estimationof life-cycle-costs (arrangement of itemsand unit prices affecting LCC,estimation of life-cycle-cost for varioustypes of bridges,etc.,) and the thirdWG’s study was on monitoring and lifecosting (case study on past examplesof monitoring, trial of monitoring usingpiezoelectric films, etc.)

R. Kannan, C. P. Tso, Ramli Osman,H. K. Ho23, in November 2004 conducteda study in Singapore. In their studythey highlighted: A life cycleassessment (LCA) was conducted toquantify the non-renewable energy useand global warming potential inelectricity generation from a typical oilfired steam turbine plant in Singapore.The study methodology, results and theempirical relations are presented,together with a brief overview of theSingapore power sector. The study alsohighlights the need for considerationof the reserves availability in the pricingmechanism and how such cost indicescould be developed based on the LCA-LCCA.

D. Janz, W.Sihn, H. J. Warnecke24

in the year 2005 conducted a study onProduct Redesign Using Value-OrientedLife Cycle Costing. In their study theyhighlighted: Life Cycle Costing Basedon a case study of vehicles. This paperexplains the theoretical approach andanalyses for designers to optimise costsand conduct product redesign by using

Value-Oriented Life Cycle Costing

Kirkham, Richard 25 in January 2005conducted a study on Re-engineeringthe whole life cycle costing process.The highlight of the study: Theapplication of Whole Life Cycle Costing(WLCC) within the constructionindustry is rapidly increasing;notwithstanding, the underlyingmethodology of many WLCC models isvariable and inconsistent. Thedeficiency in detailed recording ofdecisions based on WLCC analyses isa particular concern and moreover,attempts to capture the data related tothese decisions are not evident. Datacapture is vital in facilitating the iterativeand logical application of WLCC. In anattempt to re-engineer the WLCC designprocess, the evolving researchdescribed hereinafter reports on thedevelopment of the 'Logbook: a WLCCmodel decision support softwareapplication. The application workssimultaneously with a WLCC model toprovide the designers of buildings witha repository of decisions made basedon this data-from inception through tofinal design optimization. It isanticipated that the software willencourage the application of WLCCmodels as an iterative rather thanretrospective process.

O.O. Ugwu, M.M. Kumaraswamy, F.Kung and S.T. Ng Automation26 inOctober 2005 conducted a study onObject-oriented framework fordurability assessment and life cyclecosting of highway bridges This paperhighlights the application of an object-oriented (OO) framework to decision-making in designing for durability in thebridge domain, and a prototypeimplementation of this framework. Itdiscusses how an object-basedsolution could contribute towardsachieving the objectives of durabilityand minimum maintenance costs atproject level. The paper also givesrecommendations for further work.

C.A. Ungureanu1and I.S. Jawahir27

in the year 2007 conducted a study onthe Aluminum versus Steel in PassengerCars. The paper presents a newmethodology for total life-cycle costanalysis and employs a case studyinvolving the use of aluminum inautomotive applications. This study isaimed at developing a newsustainability model to quantify thetotal cost encountered over the entirelife-cycle of a vehicle considering allfour life-cycle stages: (1) pre-manufacturing, (2) manufacturing, (3)use and (4) post-use. Also, the paperpresents a quantitative evaluation of theenvironmental impact of usingaluminum material in a vehicle.

The paper compares the use ofaluminum with the traditional use ofsteel alloys in a given automotiveapplication by providing details ofeconomic and environmentalperformance of the vehicle over the totallife-cycle.

Berent E.Tysseland28 in October2007conducted a study on projects. TheNorwegian Ministry of Defensepublication states that whenprocurement decisions are made,systems that yield the lowest possiblelife cycle cost (LCC) for the NorwegianDefense must be procured, even if thismeans that initial procurement costbecomes higher. However, severalprojects within the community are stillcarried out and reviewed based on initialprocurement cost alone. This studyinvestigates four hypotheses, based onagency theory and earlier LCC work, inorder to help explain why this ishappening. A questionnaire wasadministered to all projects currentlyrunning in the defense community.Findings regarding project uncertainty,information symmetry, the projectleader's attitude and knowledge aboutLCC, as well as control variables arediscussed both towards theory and interms of managerial implications.

E. Scanff, K.L. Feldman, S. Ghelam,P. Sandborn, M. Glade and B.

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Foucher29 in March 2008 undertook astudy on Life cycle cost impact of usingprognostic health management (PHM)for helicopter avionics. Case studieswere conducted using a stochasticmodel to predict the life cycle costimpact associated with the applicationof prognostic health management(PHM) to helicopter avionics. The lifecycle costs of systems that assumedunscheduled maintenance and fixed-interval scheduled maintenance werecompared to the costs of precursor-to-failure and life consumption monitoringPHM approaches, and the optimalsafety margins and prognosticdistances were determined.

Commentary on Review:

The literature of LCC is mostlyconceptual in nature and there isrelatively little evidence about theapplications of LCC approaches. Fromthe review of literature the followingconclusions are drawn:

l When procurement decisions aremade, systems that yield the lowestpossible LCC must be procuredeven if this means that initialprocurement cost becomes higher.

l Application of LCC in theconstruction of highway bridgescontributes towards achieving theobjectives of durability and minimummaintenance cost at project level.

l The application of whole life cyclecosting within the constructionindustry is rapidly increasing.

l Value oriented life cycle costing ifimplemented ensures optimizationof costs and conduct of productredesigns.

l To conduct life cycle cost analysis(LCCA) in a reliable and trustworthymanner, a thorough understandingof the theoretical engineering andeconomics background must beacquired.

l Most of the LCCA input parametersare inherently uncertain, such as thediscount rate, the analysis period, etc.

l LCCA can provide a new tool forevaluating all the eco-costs andevaluating a cost effective eco-design of any product.

l There are many challenges in LCC:Forecasting of future costs is alwaysinexact; because of inadequacies ofcompanies' costing practicesmonitoring of costs during the lifecycle is not accurate enough; nonuniform costing practices andsuspicious attitudes towards theapproaches.

l Adoption of applications based onlife cycle costing has been very slowat the practical level, except for acouple of industries such as militarysector and construction industry.

l LCCA is currently a valuable tool inthe construction industry and willbecome more so as resourcesbecome more scarce. Selecting thematerials and components ofstructures based on LCCA cansignificantly decrease the lifetimecost of construction, maintenanceand repair.

l LCC procedure consists of sixsteps: Problem definitions, costelements definition, systemmodeling, data collection, costprofile development and evaluation.

l Given the power and sophisticationof today's computers and software,sensitivity analysis can be used intraditional LCCA approaches.Simulation techniques such asMonte Carlo are recommended forincorporating variability associatedwith LCCA inputs into final results.

l The focus of LCC changes duringthe products' life cycle. At thebeginning of life cycle, LCC is mainlyestimating of future costs. Over timeit is essential that the costs bemonitored throughout the life cycle.

l The objective of life-cycle costinganalysis is to optimize the total costof ownership over the life span ofan asset.

l In researching LCC and interviewingexperts in the field, it is importantthat a consistent definition is usedas to make sure each of therespondents interpret the questionsthe same way. However no exactdefinition has been agreed upon forLCC among experts in the field.

l LCC is a valuable tool in an era ofeconomic depression and highinflation.

l LCC has developed more as a resultof specific applications rather thanhypothetical models.

l Cost decisions are rarely made withina long term perspective and costconsciousness in companies isquite often poor.

l LCC has become increasinglyimportant in construction industryover the last few years. Howeverdespite its importance, it has foundlimited application so far.

Review of survey Reports andGuidelines:

In this section a review of fivereports/ guidelines pertaining to LCC isgiven:

Pump Life Cycle Costs: A guide toLCC analysis for Pumping systems(January, 2001)30 was the result ofcollaboration between the HydraulicInstitute, Euro pump and the USDepartment of Energies office ofIndustrial Technologies. Pumpingsystems account for nearly 20% of theworld's electrical energy demand. LCCanalysis is a management tool that canhelp companies minimize waste andmaximize energy efficiency for manytypes of systems, including pumpingsystems. The LCC of any piece ofequipment is the total lifetime cost topurchase install, operate, maintain anddispose of that equipment. DeterminingLCC involves following a methodologyto identify and quantify all of thecomponents of the LCC equation. TheGuide further explains that the

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components of a life cycle cost equationtypically include initial costs,installation and commissioning costs,energy costs, operation costs,maintenance and repair costs, downtime costs, environmental costs anddecommissioning and disposal costs.There are also financial factors to takeinto consideration in developing theLCC. These include: present energyprices, expected annual energy priceincrease (inflation) during the pumpingsystem lift time, discount rate, interestrate and expected equipment life; TheGuide also suggests a checklist of someuseful means to reduce the life cyclecost of a pumping system.

The New South Wales Treasury(September 2004)31 released aGuideline entitled: Total Assetmanagement -life cycle costingGuideline. The guideline besideshighlighting the meaning, significanceand utility of LCC and LCC analysisconcentrated on LCC models. Thereport also suggested the use of one ormore of the following methods foranalyzing cost data: Engineering costmethod, Analogous cost method andParametric cost method. Also the Reportsuggested a plan for LCC analysis.

Anni Lindholm and Petri Suomala(2005)32 "Present and Future of lifecycle costing- Reflections from Finnishcompanies". This discussion paperstarts with a review of literature.Quoting the study of Lukka & Granlundthe review reveals that none of theFinnish companies utilised the LCCapproach that time (1996). Six percentof the Finnish companies have usedLCC according to Hyvonen andVuorinen (2000). In their present workthe authors gathered the empiricalobservations of the present practicesin LCC in Finland in spring 2004 througha questionnaire study aimed at industrialcompanies representing differentindustries. Altogether 43 responsesonly were received. Almost 70% of therespondents are involved with LCC

annually or more often. In about half ofthe cases, LCC is used to comparealternative investment options. LCCcalculations are done in the purchasephase always or quite often in 40% ofthe cases and in the rest of the casesLCC calculations are done onlysometimes or not at all. Over 40% haveassessed the economic life cycle ofproducts with LCC and one third hasused it for budgeting purposes. Inconclusion of the discussion the paperpoints out the following: The need forLCC management becomes evidentwhen examining the longitudinal coststructure of investment products.However in spite of the long history andpotential usefulness of LCC, its use hasbeen quite limited on the practical level.The recent observations of LCC inFinnish context indicate that, in general,utilization of LCC is rare. Overall, peopleseem to be rather seldom involved withLCC.

Phil Anderson, URS Corporation,(February 2006)33 presented a Reportentitled, 'life cycle costing' to theDepartment of Transportation Research,Colorado, USA. The research projectwas initiated by the ColoradoDepartment of Transportation (CDOT).The purpose of this research project isto develop guidelines that allow CDOTto capture the long-term costs of addingadditional capacity and othertransportation related improvements tothe state highway and bridge system.Historically, only the initial cost of aproject has been analyzed to determinewhether a project would beimplemented. Future costs includingmaintenance, rehabilitation andreconstruction/replacement costs havenot been traditionally considered in thedecision making process to determine ifa project moves forward. However, thesecosts are significant and have an impacton future budgets. Regardingmethodology in developing long-termcosts associated with increasing theassets of the state transportationsystem, recurring cost for maintenance,

rehabilitation and reconstruction/replacement were planned to bedeveloped for each proposed asset. Theproposed analysis period war 40 years.

The Report pointed out the followingfour activities as the major activitiesassociated with developing initial andrecurring project costs for highway andbridge projects: Initial construction,Maintenance, Rehabilitation andReconstruction/ Replacement In theReport it is suggested that in additionto developing project cost for the fourmajor activities costs for the recurringactivities associated with the project'slife also should be developed.

Davis Langdon Managementconsulting (May 2007)34 in its reportentitled, "Life cycle costing (LCC)Methodology" presented 'A commonEuropean methodology for life cyclecosting'. In 2006 the Europeancommission appointed Davis Langdonfrom the UK to undertake a project todevelop a common Europeanmethodology for LCC in construction.The overall aim of the project was tohelp improve the competitiveness of theconstruction sector. To help achievethis aim, the key objective was todevelop a common methodology atEuropean level for evaluating LCC thatwould help improve the sustainabilityof the built environment.

The methodology for this researchconsisted of the following activities:

(i) Analysis and evaluation stage withpreliminary results and

(ii) Development of an approachapplicable at the European level forestimation of LCC and related indicatorsfor building and constructed assets.

The following countries wereselected for the study: UK, Germany,Netherlands, Sweden, Finland, Norway,Ireland, Spain, Greece, Czech Republic,Belgium and France.

To carry out the research project theconsulting unit conducted an extensivereview of existing literature, consulted

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experienced LCC practioners, haddiscussions with theoreticians of LCCand interacted with managers anddirectors involved in high level decisionmaking on the basis of the results ofthe LCC analysis.

The project concluded with thedevelopment of a common Europeanmethodology. The proposed methodo-logy is primarily aimed at public sectorconstruction clients in European UnionMember states. The aim of the proposedmethodology was to define a commonand consistent basis for undertakingLCC across Europe without replacingcountry- specific decision models andapproaches. As a key area for furtherresearch the Report suggested theintegration of the practical approachesto LCC and associated methodologieswith the practical needs of clients andpractitioners taking account of suchissues as the quality of data, the needfor simplicity of calculation methods etc.

Synthesis of the review of surveys/projects

From the above review of surveys/projects the following observationsemerge:

(i) One of the key ways ofimproving competitiveness in theconstruction industry is theimplementation of LCC tools and criteriain all key phases of constructionprocess.

(ii) There are four major activitiesassociated with developing initial andrecurring project costs for highway andbridge projects: Initial construction,maintenance, Rehabilitation andReconstruction / Replacement. As partof LCC analysis in addition todeveloping project cost for the fourmajor activities costs for recurringactivities associated with the projectslife also should be developed.

(iii) LCC is a six-staged process:

Stage 1: Plan LCC Analysis

Stage 2: Select /Develop LCC model

Stage3: Apply LCC model.

Stage4: Document and Review ofLCC results.

Stage5: Prepare Life Cost Analysis

Stage6: Implement and Monitor lifecost analysis.

The first four stages comprise theLife Cost Planning phase with the lasttwo stages incorporating the Life costAnalysis phase.

(iv) The LCC of any piece ofequipment is the total lifetime cost topurchase, install, operate, maintain anddispose of the equipment. LCC of aPumping system includes initial cots;installation and commissioning cost,energy costs, downtime costs,environmental costs anddecommissioning and disposal costs.

(v) The recent observations ofLCC implementation in Finnishcompanies indicate that in general,utilization of LCC is rare. This suggeststhat LCC might be primarily associatedwith capital budgeting rather than beperceived as part of continuous long-term cost.

Conclusion:

Life Cycle Costing is a relativelyyoung concept of cost accounting.Mostly applied in the military field tillthe beginning of 1980s, from that pointof time has spread to the businesssector and is used there in managementaccounting. Also called Whole LifeCosting it is a process of accumulationof costs for activities that occur overthe entire life cycle of a product - frominception to abandonment by themanufacturer and consumer. Theobjective of LCC analysis is to optimizethe total cost of ownership over the lifespan of an asset. From the review ofliterature it is ascertained that LCCprocedure consists of six steps: problemdefinition, cost elements definition,system modeling, data collection, costprofile development and evaluation.Adoption of application based on LCChas been very slow at the practical level,

except for a couple of industries suchas military sector and constructionindustry.

References

1. Harold E. Marshall and Rosalie T. Rueggin February 1977, Energy Conservationthrough Life-Cycle Costing,Management control systems and trustin outsourcing relations. ManagementAccounting Research. Vol. 14. No. 3,281-307.

2. Taylor, W. B. 1981. The Use of LifeCycle Costing in Acquiring PhysicalAssets. Long Range Planning. Vol. 14.No. 6, 32-43

3. Yosef S Sherif, William J Kolarik,Omega, Volume 9, Issue 3, 1981, Pages287-296,Life cycle costing: Concept andpractice.

4. Yosef S. Sherif, Reliability Engineering,Volume 3, Issue 3, May 1982, Pages173-177,An optimal maintenance modelfor life cycle costing analysis

5. Klaus L. Wübbenhorst,Long RangePlanning, Volume 19, Issue 4, August1986, Pages 87-97,Life cycle costing forconstruction projects

6. Asiedu, Y. & Gu, P. 1998. Product lifecycle cost analysis: state of the artreview. International Journal ofProduction Research. Vol. 36. No. 4,883-908

7. R. Gary hicks, and Jon a. Epps, pe 1994,life cycle cost analysis of asphalt- rubberpaving materials, Managerial AuditingJournal. Vol.16.No.1, PP, 17-27.

8. J. Infrastruct. Syst Journal ofInfrastructure Systems, Vol. 1, No. 2,pp. 5-14. 1996, Life cycle costing inmunicipal construction projects

9. Aouad, G, Mari, F, Child, T, Brandon,P & Kawooya, A. (1997a). ConstructionIntegrated Databases- Linking design,planning and estimating. Proceeding ofthe international conference on therehabilitation and development of civilengineering infrastructures. AmericanUniversity of Beirut, June, pp 51-60.

10. Per Dahlén, Gunnar S Bolmsjo,

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International Journal of ProductionEconomics, Volumes 46-47,December1996, Pages459-467,Life-cycle cost analysis of the labor factor.

11. David G. Woodward Division ofAccounting, Staffordshire UniversityBusiness School, Leek Road, Stoke onTrent ST4 2DF, UK Available online10 June 1998. Life cycle costing-Theory,information acquisition and application.

12. James Wall III and Michael R.Smith1998, Intreim Technical BulletinRecommended Procedures ForConducting Life Cycle Costing.

13. Yoshio Kawauchi and Marvin Rausand,1999, Life Cycle Cost Analysis in oiland Chemical Process Industries.

14. Katil Amelio and Martha G. Vangeem,2000, Life Cycle Cost Literature Surveyand database.

15. Jay Goldbaum, CDOT Report NumberCDOT-. R1-R-003, March 2000. Life-Cycle Cost Analysis, Life Cycle CostAnalysis: State-of-the-Practice.

16. Asiedu, Y., Gu, P. (1998), andEmblemsvåg, J. (2001), "Activity-basedlife-cycle costing", Managerial AuditingJournal, Vol. 16 No.1, pp.17-27.

17. Vestal Tutterow, Gunnar Hovstadius,and Aimee McKane, "Going with theflow: Life cycle costing for industrialpumping systems" (July 8, 2002).Lawrence Berkeley National Laboratory.Paper LBNL-51042.

18. Yehoshua Liebermann and MeyerUngar, December 2002, Efficiency ofconsumer intertemporal choice underlife cycle cost conditions.

19. Nick Bakis, Mike Kagiouglou, GhassanAouad and Dalanthi Amaratunga, 2003,an integrated environment for life cyclecosting in construction.

20. Dr. Kaan Ozbay, Dr. Neville A. Parker,

Dima Jawad, Sajjad Hussain July 2003,Guidelines for Life Cycle Cost Analysis,Federal Highway Administration,U.S.Department of TransportationWashington, D.C.

21. Anni Lindholm and Peri Suomala, 2004,the possibility of Life Cycle Costing inOutsourcing decision Making.

22. Kensetsukonsarutantsukyo KinkishibuRaifu Saikuru Kosuto no Keikaku,Sekkei eno Han'ei Hoho Heisei 16nenVOL.; NO.; PAGE.385P (2004),Method to apply life-cycle-costing toplanning and design.

23. R. Kannan, C. P. Tso, Ramli Osman, H.K. Ho, Energy Conversion andManagement, Volume 45, Issues 18-19,November 2004, Pages 3093-3107

LCA-LCCA of oil fired steam turbine powerplant in Singapore.

24. D. Janz, W. Sihn, H.-J. Warnecke CIRPAnnals - Manufacturing Technology,Volume 54, Issue 1, 2005, Pages 9-12Product Redesign Using Value-OrientedLife Cycle Costing.

25. Richard Kirkham ConstructionManagement & Economics. Volume(Year): 23 (2005) Issue (Month): 1(January) Pages: 9-14 the applicationof Whole Life Cycle Costing (WLCC).

26. O.O. Ugwu, M.M. Kumaraswamy, F.Kung, S.T. Ng Automation inConstruction, Volume 14, Issue 5,October 2005, Pages 611-632 Object-oriented framework for durabilityassessment and life cycle costing ofhighway bridges

27. C.A. Ungueranu and I.S. Jawahir, 2007,Aluminum Vs steel in Passenger Cars.A conceptual framework forunderstanding the outsourcing decision.European Management Journal. Vol. 17.No. 6, 645-654.

28. Bernt E. Tysseland International Journalof Project Management, In Press,Corrected Proof, Available online 25October 2007 Life cycle cost basedprocurement decisions: A case study ofNorwegian Defense Procurementprojects.

29. E. Scanff, K.L. Feldman, S. Ghelam, P.Sandborn, M. Glade, B. FoucherMicroelectronics Reliability, Volume47, Issue 12, December 2008, Pages1857-1864,Life cycle cost impact ofusing prognostic health management(PHM) for helicopter avionics.

30. Pump Life Cycle Costs: A Guide to LCCAnalysis for Pumping Systemscollaboration between the HydraulicInstitute, Europump, and the USDepartment of Energyis Office ofIndustrial Technologies (OIT), (January2001).

31. Total Asset Management Manual -Asset Disposal Strategic Plan forguidelines on technology life-cycle costs,The New South Wales Treasury(September 2004).

32. Annie Lindholm and Petri Suomala:"Present and Future Of Life CycleCosting -Reflections from FinnishCompanies", LTA, February, 2005.

33. Phil Anderson, URS Corporation, LifeCycle Costing, February 2006,Colorado Department of Transportationresearch branch.

34. Davis Langdon Management consulting(May 2007), "Life cycle costing (LCC)Methodology" presented 'A commonEuropean methodology for life cyclecosting'. Enterprise Publications,European Commission. Rd Endorsedduring 3Tripartite Meeting Group(Member States/Industry/Commission)on the Competitiveness of theConstruction Industry.q

NOTICE

Enthused with the roaring success of the Retail Special of your journal, 'The Management Accountant',we are planning to continue with the series of specials with the next special edition being earmarked forthe Banking and Financial Services Industry (BFSI). As before, we depend on you, our loyal and eruditereaders, to contribute by way of meaningful articles on this sector so that the next special edition is evenbetter received and more useful.

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I ndustry needs professionals within-depth costing domainknowledge and at the same time is

ERP savvy; preferably with ERP costingconfiguration knowledge to guideorganisation to derive maximum valueout of ERP investment

l A leading engineering equipmentmanufacturer is not getting correctproduction cost information fromERP system and need to engage aconsultancy firm to find root causeof the problem; reasons are systemconfiguration problems, validationnot built in to the system so usernot entering costing relevant data,production people not enteringactivity used correctly etc.

l One of the leading Non ferrous metalextracting company cannot rely onproduct cost data from SAP system;because its' incorrect overhead ratecalculation, planned activity hoursand activity rates not properlydefined and no body from companyside is able to grasp systemconfiguration setting for controllingmodule and its impact on costcalculation etc.

l An industrial crane manufacturer isnot getting its trial balance andprofit for each of its product group;as they wrongly define theirorganization structure and didn'tleverage profit center functionalityof SAP

All above mentioned problemswould have been solved during ERPimplementation stage itself; if companyhad involved the IT savvy professionalwith in-depth understanding of costingprocess of that industry with knowledge

ERP savvy CMAN.K.Patel*

*ICWA, CISA, Management Consultant

of how the costing works in typical ERPsystem.

I had seen several instances ofcompanies not getting correct costinformation even after investing Rs. 1to 2 crore in ERP system implementation.The problem is not with the ERPsystem/ package but it is with poorunderstanding of business user aboutdata flow with in integrated ERP systemthat affects cost calculations; andresulting suboptimal systemconfiguration. It is found that in severalinstances ERP controlling consultantdoesn't use validation and substitutionsto capture costing relevant data.

ERP system captures large amountof data from different interrelatedtransactions which can be used forbetter planning purpose but during myexperience I found that almost allcompanies are not able to effectivelyleverage that data for cost planning andbudgeting.

Discussion in previous paragraphsproves that industry needs costingprofessionals with ERP systemknowledge to utilize the ERP for its' theintended purpose; providing relevantMIS on real time basis. There is scarcityof the ERP savvy costing professionals.I would like to take this opportunity torequest ICWAI professionaldevelopment committee to forge ERPeducation tie up for "FICO certification"on similar to what we have withORACLE with different ERP vendors i.e.SAP, MICROSOFT, LAWSON etc.

The costing system knowledge withERP understanding make CMA mostsuitable to take up independentconsulting assignments and also to finebetter jobs. The ERP savvy costaccountant is in great demand even inpresent down market.

The typical components of

controlling module of SAP ERP systemincludes:

1. Overhead Cost Controlling (CO-OM)

a. Cost and Revenue elementAccounting (CO-CEL)

b. Cost Center Accounting

c. Internal Orders

d. Activity based costing

2. Product cost controlling (CO-PC)

a. Product cost planning

b. Cost object controlling

c. Actual costing / Material ledger

3. Profitability management

a. Profitability analysis (CO-PA)

b. Profit center accounting (EC-PCA)

At present I am giving brief outlineabout overhead cost accounting in SAP:

As we all know overhead cost is thecost that cannot be assigned directlyto cost objects e.g. production orders;Overhead cost accounting addressesneed for allocation of overhead cost andallows for analysis and controllingoverhead costs.

As overhead grows as %of totalcost; it is becoming increasinglyimportant to analyze and controloverhead costs. Similarly, increasinglysophisticated tools are needed tofacilitate the application of overhead toproduction orders and other costobjects.

In SAP system, base for OHcalculation is defined in cost sheet andthen is assigned to production orderthru costing variant.

Subcomponents of overheadcalculation are

a) Cost and Revenue ElementAccounting (CO-OM-CEL)

There are primary and secondarycost element defined in the system.They are the master data like GL master.

Primary cost elements is generallycreated for every P&L type GL account.

While secondary cost elements are

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crated for posting with in controllingmodules i.e overhead posting, activitypostings etc.

The cost flows in CO can lead to theneed for reconciliation between internaland external accounting in certaincases. Cost and Revenue ElementAccounting is the CO componentproviding functionality that supportsthis possible requirement. TheReconciliation Ledger providesreporting capabilities for identifying thedifferences in costs between FI and CO,as well as a tool for creating recon-ciliation postings to FI, if desired.

b) Cost Center Accounting component(CO-OM-CCA)

The Cost Center Accountingcomponent (CO-OM-CCA) trackswhere costs occur in your organization.The cost center is an organizational unitin a controlling area. Cost centers canbe defined according to several differentdesign approaches. A typical approachcould be for an enterprise to define acost center for each low-levelorganizational unit that hasresponsibility for managing costs. Ascosts are incurred, they are assigned orposted to the appropriate cost center.These costs could include payroll costs,rent and utility costs, or any other costs

assignable to a given cost center.

Each cost center is assigned to acategory, e.g. Administration costcenter, production cost center, etc. Eachcost center master record has a field forthe name of the person responsible forthe cost center.

Cost centers can be groupedtogether to provide summary costinformation. In fact, a fundamentalrequirement for implementing CostCenter Accounting is the creation of astandard hierarchy for a controllingarea. The standard hierarchy includesall cost centers in that controlling area,and provides the ability to analyzesummary costs at each node of thestructure. This will be described ingreater detail in the next Unit.

c) Internal Order

An Internal Order is an extremelyflexible CO tool that can be used for awide variety of purposes to track costsand, in some cases revenues, within acontrolling area. Internal orders providecapabilities for planning, monitoring,and allocation of costs.

Internal orders may be used for avariety of purposes, and can be groupedinto four general categories:

n Overhead order: for trackingoverhead cost for particular purpose

n Investment order: To monitor costincurred in creation of a fixed asset

n Accrual order: used to offsetposting of accrued costs

n Order with revenue: Used to replacethe cost accounting part of SDcustomer orders

d) Activity based costing

Traditionally, overhead costs areallocated from cost centers to costobjects through various methods, suchas surcharges and activity allocations.

ABC has been implemented in R/3as an enhancement to the costmanagement functionality. All overheadcosts are still assigned to cost centers.The cost centers that utilize resourcesin carrying out a process allocate thecost of those resources to the process.(Example: a Purchasing cost centerwould allocate costs it incurred inpreparing and distributing a Request forQuotations to a Procurement businessprocess.) The processes are thenconsumed by cost objects (such asproduction orders) and the related costsare allocated to those cost objects.

Cost Center Accounting answersthe question of where costs occur,whereas Activity-Based Costinganswers the question of why (for whatpurpose) costs occur.q

BOOK ON ECONOMICS RELEASED

It is a matter of pride that a book on Economics authored by Dr Girish Goyal, AICWA, ACS, PhD andMrs Meena Saboo, MA, NET (Eco) and faculty of Economics at Jaipur Chapter of ICWAI waslaunched by MP, Dr Mahesh Joshi.Written in a simple style, the book has 'Important points to learn and remember just before exam' for thebenefit of students. The book is very comprehensive and divided into eight sections complete withdiagrams, charts, tables, and schedules for better understanding. Many short questions have been givenat the end of each chapter for practice purpose. The authors have linked the book to the 'Harit RajasthanProgramme' and have announced a complimentary copy for each student who plants and maintains fivetrees.Dr Mahesh Joshi remarked that the book will prove to be a milestone for Foundation students.

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A. The importance of costing to good financial management

The ability to identify, measure, interpret and present costs as they relate to an organization's economic flow of goods andservices, both historically and in a forward looking context, is necessary for an informed understanding of the organizationaldrivers of profit and value.

Appropriate understanding and analysis of costs is essential to operational management. Cost information shouldprovide insight into the costs of specific activities, goods and services and the cost of doing business and effecting changesover time. A costing system needs to assign operating cost as resources are consumed based on the resources' traceabilityto specific activities or outputs and measure the costs of individual activities and outputs. Since costing is inextricablylinked to the organization's flow of resources, the more accurately a costing model represents the operational flow ofresources, the more clarity decision makers will have in using cost data. Care needs to be exercised in selecting data and howit is prepared. Because costing can support both regular and non-routine reporting for accountability purposes and specificanalyses in support of strategy, planning and general business decisions, the way it is presented is equally important as theactual data.

B. Fitness for purpose

Cost information should be prepared in a manner appropriate to the specific context and purpose of its use of which thereare three principal applications:

(i) External reporting- historical and descriptive

(ii) Performance evaluation and analysis- interpretative and diagnostic

(iii) Planning and decision support- analytical and predictive

The context of costing actions ranges from purposes that are primarily concerned with recording past events- externalreporting and accountability for past performance- to the support of a wide range of commercial and performance decisionsin which the focus is on how to influence future events.

(i) External financial reporting is mainly historical and therefore descriptive of past performance at an aggregate level. Costfigures used in financial statements are based on absorption costing. However, cost information provided to managementto support performance evaluation, analysis and planning and decisions support can be more effective where theinformation is based on a clear and timely link between causes and their effects.

(ii) Performance evaluation and analysis allows interpretative and diagnostic activities to evaluate and analyze pastperformance. The method calls for an appreciation of the underlying business operational models and the internal andexternal circumstances that affect them. Effective performance measurement, analysis and learning require that costinformation be linked to the underlying resources and operations being evaluated.

(iii) Planning and decision support covers management actions to be implemented in every aspect of an organization's futureoperations. This calls for a clear understanding of an organization, the commercial or policy rationale for the decisions,and the organization's operational models and processes. It also requires clear definition of the status quo baseline costagainst which changes will be measured. A cost accountant should be able to interpret and explain the significance of thecosting information provided for decisions and its limitations and to explain the reasons for differences from the dataused for legal purposes. Costing information can be presented in a range of formats, all of which should be reconcilableto each other.

International Good Practice Guidance (IGPC)*The Professional Accountants in Business Committee (PAIB Committee) of IFAC has framed the International GoodPractice Guidance (IGPG) as a benchmark to good practice in applying costing systems and methods and using costinginformation, particularly for managerial decisions. This will enable practicing cost accountants to provide a descriptiveand historical view of costs and a predictive forward looking view that together provide the basis for analysis, evaluation,planning and decision support. PAIB Committee has enunciated six key independent principles of evaluating and improvingcosting in organizations:

*The Summary has been compiled by Ms. Anamika Mukherjee, Deputy Director, Research and Journal, ICWAI.

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C. Business model/ reality driven

Cost models should be designed and maintained to reflect the cause and effect interrelationships and the behavioraldynamics of the way the organization functions. The information needs of decision makers at all levels of an organizationshould be taken into account, by incorporating an organization's business and operational models, strategy, structureand competitive environment.

A costing system should be designed to be complete, in that it accounts for all costs and should assign the costs of aresource to the cost object that consumed that resource. The purpose of cost modeling for decision support is to replicatethe essential characteristics of an organization's actual resource acquisition, deployment and consumption in a series ofmathematical relationships where the measured quantities of resources can be translated to money. Such models need to bedynamic so that they can describe economic behavior and how businesses change. Costing for decision support shouldalso have a predictive capability- the ability to make forecasts. This will help focus on helping an organization achieving itsstrategic objectives, taking into account the nature of an organization, its business model, its culture, structure and competitiveenvironment. An organization converting to a new costing system should consider whether its strategy and culture supportsa new approach and whether a cost benefit review might offer the prospect of a subsequent strategic benefit.

D. Materiality/ cost effectiveness

The design, implementation and continuous improvement of costing methods, data collection and systems should reflecta balance between the required level of accuracy and cost of measurement based on the competitive situation of theorganization.

In theory, every aspect of cost behavior in an organization is capable of being analyzed to determine its causes, whichhowever involves expensive administrative efforts. Attempting to model every last costs item would bring diminishingreturns on the value of extra accuracy and visibility. Thus there is always a trade-off between system cost and the qualitiesand quantity of available information, which is a matter of professional judgment. The costing system's execution needs totake into account the nature of an organization's operations; precision, accuracy, minimum frequency and visibility of costinformation required by users; practicability of effort and data collection and processing; and the organization's overall ITstrategy. The design, implementation and continuous improvement of costing models, data collection and systems shouldbe subject to cost benefit analysis.

E. Comparability over time and consistency

Cost information should be collected and analyzed systematically and in such a way as to ensure comparability over time,whether in a routine information system or for a specific application and/ or purpose.

This principle inherently requires the professional accountant to maintain a level of organizational competency incosting and knowledge of the organization's costing techniques, practices and systems limitations and strengths. Thesystem of data collection should be systematic, consistent with stated principles over time and continually adapted toaccurately reflect the reality of an organization's operations, functions and decisions support needs. The complexity of theIT system will depend on the size, resources and needs of an organization. Models incorporated in the IT system should bethoroughly documented. Where costing systems rely on using non-financial information the aim should be to applyexpectations of consistent preparation and reliability to the non financial information in a manner similar to that applied tofinancial services of data.

F. Transparency and audit ability

Definitions and sources of cost data, the operational and other non-financial data underpinning them, and the methods ofcalculating costs, should be transparent to users and recorded and capable of review, risk analysis and assurance.

This principle requires systematic documentation of the building a cost model and someone to assume responsibility forkeeping it upto date. The descriptions should include the way source data is collected, the way cause and effect relationshipsare derived and applied, the construction of the models, the design specification of any IT system and the procedures forupdating the same. It requires comprehensive requirements for audit of cost accounting using cost accounting standards.Changes to cost assignment methods, cost drivers etc. should be applied consistently from the date of change and costinformation should be accompanied by advice on limitations of its accuracy and applicability. All assumptions formulated inpreparing costing information should be periodically reviewed and updated.

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IFAC has launched Costing Levels Continuum Maturity Model as international good practice guidance on evaluatingand improving costing in organizations. This model meets the key principle D stated above.

Why: The Costing Continuum Maturity Model can be used as a self-assessment tool to help an organization determineits current capability and consider appropriate action for improving performance evaluation and analysis.

For whom: It can apply to any enterprise wide organization, internal department or sub contractor that:

a) provides products and services to users, commercial customers or public sector or non profit recipients.

b) Needs and appropriate level of resources (neither deficient nor wastefully excessive) to meet customers' pricessensitive needs.

c) Requires revenues or appropriated funds to sustain long-term payment for its resources and make investments in itsfuture.

What: The model comprises of 12 maturity levels of data collection, calculations and reporting that range from beingsimplistic to those that offer a high level of transparency, foresight and improved insight into the effects incremental changesare likely to have on required resources and costs. Each next level up the continuum expands on the prior one and morebenefits accumulate as the organization improves its capabilities. Different organizations may find themselves in betweenlevels or at various places on the journey.

The 12 Costing Continuum Levels:

1. Bookkeeping: Exclusive financial accounting and reporting at its fundamental level.

2. Process viability (process costing, lean accounting): This level links and accumulates primary cost centers in timesequence. This costing technique, called lean accounting is used to support process improvement method called valuestream mapping. A value stream includes all the value added activities involved in providing specific products andservices to customers.

3. Partial visibility (excluding internal support): It includes the cost of processes that consumes resources in the cost ofoutputs. Non product making costs are not included.

4. Visibility (with internal and external support): This is the first level of the costing continuum that allocates indirect andshared costs to cost objects.

5. Improving output information with approximate accuracy: It calculates costs in greater detail for individual outputs notjust their groups.

In level 5a, (traditional standard costing): the work centers within a cost center are individually tracked. Then each workcenter's accumulated costs are directly associated with a single unit of output to produce the individual output and its cost.The use of operational quantities results in reasonably accurate costs and standard metrics because they are direct.

Level 5b, (project accounting and job order costing) applies to organizations with special conditions where theorganisations' work and processes are typically not repetitive or recurring and whose purpose is usually unique for the enduser.

6. Improved treatment of indirect costs to increase accuracy: This level substantially increases the accuracy of output,product, and standard service- line costs by tracing indirect expenses to outputs in a way that is more consistent with thecausality principle.

In level 6a (Activity based costing), two or more work activities for each work center are defined.

In level 6b (multiple stage activity based costing), multi levels of activity cots are added in two ways: (i) people activitiesare isolated from asset activities, (ii) activities that are relatively more indirect are traced to activities that are relatively lessindirect.

In level 6c (automated multiple stage activity based costing), estimates of activity driver quantities provided byknowledgeable employees are replaced with actual measured quantities extracted form transactional operating systems.

7. Customer profitability reporting: In this level, customers become the ultimate final cost objects in the cost assignmentnetwork. Products and services volume and their mix are traced to each customer's cost object. Level 7 accomplishes thisby adding calculated cost attributable to channels and customers that were not included in level 6. Level 7 final costobjects also include the associated revenues from priced products and services. Level 7 also assigns non-product andnon customer caused costs to final cost objects. This prevents over-costing products and customers with costs withwhich they have no causal relationship.

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8. Unused capacity awareness: Organizations at level 8 determine by estimating the amount of each resources, idle orunused capacity amount of time and assign these costs to a business sustaining cost objects called unused or idlecapacity. This thus lays the groundwork for better quality of optimization decisions regarding incremental gains thatresult from change in output.

9. Demand driven planning with capacity sensitivity (Activity Based Resource Planning): From this level, there is a shiftfrom cost push (top down) model to a quantitative demand pull (bottom up) model.

Level 9a: One time customer orders with consumption relationships to resources

Level 9b: Aggregate customer orders with consumption relationships to resources

10. Time Driven Activity Based Costing: In contrast to the pull ABC based activity based resource planning of level 9,where activity consumption rates are recalibrated after determining past period resource costs, level 10 freezes eachoutput's activity time rate as a standard rate and calculates each activity cost as a standard cost. The net differencebetween actual resource cost and aggregate standard activity cost can be used as a measure for unused or deficientcapacity.

11. Resource consumption accounting: Level 11 replaces activity-to-activity relationships in the multi-stage cost assignmentnetwork with resource-to-resource or activity-to-resource relationships, where understanding these relationships isessential to properly reflect resource costs and their characteristics. This level also introduces a resource specific costobject called a resource pool that serves to manage capacity and capture the cost characteristics unique to a set ofhomogenous resources.

12. Simulation: Simulation is a high form of modeling where modeling represents physical operations. Such simulations canproject and estimate the level of resources and the total and unit cost of the processes and outputs that consume theresources. This type of simulated planning includes the reality if processing and wait times, product positions, resourcecapacity consumption rates and capacity constraints.

NOTE: This Guidance Note is available at www.ifac.org. Readers are requested to discuss this note further through theircomments for publication in the Journal.

Cover Feature

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IFRS has Implications for Internal Auditors, Says New Report*New Report Outlines Potential Impact of IFRS on Business ActivitiesAs listed companies in more than 100 countries are now making a switch to filing financial statements using InternationalFinancial Reporting Standards (IFRS), business activities in organizations throughout the world are trying to determinetheir role in the transition and how they will be impacted. The Institute of Internal Auditors Research Foundation (IIARF)has released a new report, IFRS: What Internal Auditors Need to Know. The guidance aims to inform and prepare internalaudit practitioners and their organizations for the potentiality of IFRS adoption.

"An important role played by the internal auditors is that of educator to management and the audit committee," said IIAPresident Richard Chambers, CIA, CGAP, CCSA. "In addition to understanding the changes IFRS will bring to the waythe organization is run and governed, management and the board should have a clear grasp of the internal auditor's roles.The chief audit executive (CAE) is integral to ensuring that this is the case."

Although the accounting or finance department is in charge of the entire IFRS project from initiation through execution,the internal audit activity has various responsibilities throughout the process. The internal auditors should review theIFRS project plan to ensure the organization is prepared appropriately, the project is designed and scoped adequately,and the process is managed effectively and efficiently. During this pre-implementation phase, the internal auditorsshould:

n Ensure proper controls are in place.n Perform readiness testing.n Review the communication plan.n Test the adequacy of the change management plan.n Review management's budget to ensure necessary expenditures are included.

The internal auditors should work closely with the external auditors throughout the implementation process. Theyshould help identify all affected areas and ensure all process documentation is updated. They should test internalcontrols, ensuring any necessary adjustments are made to the monitoring processes and that all controls functionproperly in the new IFRS environment.

Following IFRS implementation, the internal auditors should test, at a minimum, high-risk areas for accuracy and makesure certain controls are in place for the continuous monitoring of IFRS regulatory changes. They then should provideassurance to management that the revised internal control structure is working properly and feeding into accuratefinancial reports.

Internal auditors should also determine when their organization might be required to comply and step forward to initiateconversations with senior management, accordingly. They should make sure they are included in preliminary discussionson the conversion process, covering such topics as IT system upgrades, additional accounting and audit expertise, andobtaining board or audit committee support to ensure the needs for the project will be met.

IFRS: What Internal Auditors Need to Know points out that many business activities across organizations will beimpacted by the transition to IFRS.

n Those involved in R&D and production will be involved in defining inventory capacity and measurement, determiningcomponents of property, the physical plant, and equipment; and clarifying phases of research and development.

n The communications function will help ensure that financial communications are appropriate and clear, and that theyaccurately reflect fair value accounting and its impact on key performance indicators.

n The legal staff will need to interpret IFRS contractual terms and conditions, which might result in the organization'sneed to revise processes and systems for entering into, drafting, approving, or monitoring contracts.

n The need for detailed hedge documentation and effectiveness testing will impact those responsible for treasury, andthe tax department will have to work closely with the accounting staff to examine the impact IFRS might have on newfinancing structures.

n Human resources might be required to adjust the calculation base for certain types of compensation, such as profitsharing and bonuses.

*The news article has been taken from the website of The Institute of Internal Auditors.

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NOTIFICA TION

Ref. No. DS-3/1/7/09 July 29, 2009

Finance Act 2008 involving Assessment Year 2009-2010 will be applicable for the subjectsBusiness Taxation (Intermediate) and Strategic Tax Management (Final) under Syllabus 2002for the purpose of December 2009 term of Examination.

Arnab Chakraborty,Director of Studies

NOTIFICA TION

Ref. No. DS-3/2/7/09 July 29, 2009

Finance Act 2008 involving Assessment Year 2009-2010 will be applicable for the subjectsApplied Direct Taxation (Intermediate), Applied Indirect Taxation (Intermediate) and Indirect& Direct - Tax Management (Final) for the purpose of December 2009 term of Examinationunder Revised Syllabus 2008.

Arnab Chakraborty,Director of Studies

n Marketing and sales might be confronted with issues related to branding and trademarks, net value of inventory,revenue recognition, conditions of sale, and embedded derivatives.

IFRS will obviously bring a number of changes to the way organizations conduct business and report on their financials.IFRS: What Internal Auditors Need to Know provides a few examples of the far-reaching implications, including:

n More entities - such as joint ventures, special purpose operations, and franchises - may be consolidated.

n Liabilities will be recognized and measured differently.

n Development costs will be deferred and amortized.

n Impairment charges will be recognized earlier and measured differently.

n Financial assets and liabilities will be measured differently.

n Depreciation computation will be more complicated.

n There will be a need to focus more on the economics underlying transactions and events.

By the end of 2009, the U.S. Securities and Exchange Commission (SEC) will offer approximately 110 U.S. companies theoption to use IFRS. Then, in 2011, the SEC will evaluate the progress participating companies have made in achievingproposed milestones, and will determine whether to mandate IFRS adoption. If it is adopted, roll-out will take place instages, beginning with the largest publicly traded companies; and the first wave of reports based on IFRS will be filed in2014. If IFRS is, indeed, adopted in 2011, all listed companies will be required to use it by 2016.

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THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIAEXAMINATION TIME TABLE & PROGRAMME - DECEMBER 2009

PROGRAMME FOR SYLLABUS 2002 PROGRAMME FOR SYLLABUS 2008 (REVISED)Day, Date Final - 2002 Intermediate - 2002 Intermediate - 2008 Final - 2008 Foundation& Time 9.30 A.M. to 12.30 P.M. 2.00 P.M. to 5.00 P.M. 9.30 A.M. to 12.30 P.M. 2.00 P.M. to 5.00 P.M. 2.00 P.M. to 5.00 P.M.

Thursday, Operation and Project Cost and Management Financial Accounting Capital Market Analysis—10th December, 2009 Management and Control Accounting & Corporate Laws

Friday, Advanced Financial Management Information Systems—

Financial Management—11th December, 2009 and International Finance and Technology & International Finance

Saturday, Strategic Management Business Laws and Commercial and Industrial Management Accounting–—12th December, 2009 and Marketing Communication Skill Law & Auditing Strategic Management

Sunday, Strategic Tax Business Taxation Applied Direct Taxation Indirect & Direct–—13th December, 2009 Management Tax Management

Monday, Management Accounting– Management Accounting– Cost & Management Management Accounting-EnterpriseOrganisation and14th December, 2009 Design Making Performance Management Accounting Performance ManagementManagement Fundamentals

Tuesday, Management Accounting-Financial Advanced Financial—

Advanced Financial Accounting15th December, 2009 Strategy and Reporting Accounting Accounting & Reporting

Wednesday, Cost Audit and Auditing Operation Management Cost Audit & Economic and Business16th December, 2009 Management Audit and Information Systems Operational Audit Fundamentals

Tursday, Valuations Management Quantitative Applied Indirect Taxation Business Valuation Management Business Mathematics and17th December, 2009 and Case Study Methods Statistics Fundamentals

PROGRAMME FOR MANAGEMENT ACCOUNTANCY COURSE - DECEMBER 2009 EXAMINATION

Thursday, 10 th December, 20099.30 A.M. to 12.30 P.M.

Management Accountancy

Thursday, 10 th December, 20092.00 P.M. to 5.00 P.M.

Advanced Management Techniques

Friday, 11th December, 20099.30 A.M. to 12.30 P.M.

Industrial Relations &Personnel Management

Friday, 11 th December, 20092.00 P.M. to 5.00 P.M.

Marketing Organisation & Methods

Saturday, 12 th December, 20099.30 A.M. to 12.30 P.M.

Economic Planning & Development

EXAMINATION FEESStage (s) Final Examination Intermediate Examination Foundation Course Examination Management Accountancy Examination

One Stage (Inland Centres) Rs.800/- Rs.700/- Rs.700/-(Overseas Centres) US $ 100 US $ 90 US $ 60 Per Group Rs. 2500/-

Two Stages (Inland Centres) Rs.1600/- Rs.1400/-(Overseas Centres) US $ 100 US $ 90

1. Application Forms for Foundation Course, Intermediate and Final Examinations are available from Institute's Headquarters at 12, Sudder Street, Kolkata, Regional Councils and Chapters of the Institute onpayment of Rs. 30/- per form. In case of overseas candidates, forms are available at Institute's Headquarters only on payment of US $ 10 per form.

2. Last date for receipt of Examination Application Forms without late fees is 25th October, 2009 and with late fees of Rs. 200/- is 4 th November 2009.3. Examination fees to be paid through Bank Demand Draft of requisite fees drawn in favour of the Institute and payable at Kolkata.4. Students may submit their Examination Application Forms along with the fees at ICWAI, 12 Sudder Street, Kolkata -700016 or Regional Offices or Chapter Offices. Any query can be sent to Sr. Director

(Exam.) at H. Q.5. For December 2009 term of Examinations questions on the subjects - "Business Taxation" and "Strategic Tax Management" for Syllabus 2002 & "Applied Direct Taxation", "Applied Indirect Taxation" and

" Indirect & Direct Tax Management" for Syllabus 2008 will be set considering the Finance Act, 2008 involving Assessment Year : 2009-2010.6. Examination Centres : Agartala, Ahmedabad, Allahabad, Asansol, Aurangabad, Bangalore, Baroda, Bhilai, Bhopal, Bhubaneswar, Bilaspur, Bokaro, Berhampur(Ganjam), Calicut,Chandigarh, Chennai,

Coimbatore, Cuttack, Dehradun, Delhi, Dhanbad, Durgapur, Ernakulam, Faridabad, Ghaziabad, Guwahati, Hardwar, Howrah, Hyderabad, Indore, Jaipur, Jalandhar, Jammu, Jamshedpur, Jodhpur, Kalyan,Kanpur, Kolhapur, Kolkata, Kota, Kottayam, Lucknow, Ludhiana, Madurai, Mangalore, Mumbai, Mysore, Nagpur, Naihati, Nasik, Neyveli, Panaji(Goa), Patiala, Patna, Pondicherry, Pune, Rajahmundry,Ranchi, Rourkela, Salem, Shillong, Surat, Thrissur, Tiruchirapalli, Tirunelveli, Trivandrum, Udaipur, Vellore, Vijayawada, Vindhyanagar, Waltair and Overseas Centres at Dubai and Muscat.

7. A candidate who is completing all conditions will only be allowed to appear for examination.8. Probable date of publication of result : Foundation - 1st February 2010 and Inter & Final - 20th February 2010.

C. BoseSr. Director (Examination)


The institute of Cost and Works Accountants of India

Examination Time Table & Programme - December 2009

CERTIFICATE IN ACCOUNTING TECHNICIANS [ CAT ]

Day & Date Time Foundation Course (Entry Level) Part - I

Monday, 14th December, 2009 02.00 P.M. to 05.00 P.M. Organisation and Management Fundamentals

Tuesday, 15th December, 2009 02.00 P.M. to 05.00 P.M. Accounting

Wednesday, 16th December, 2009 02.00 P.M. to 05.00 P.M. Economics and Business Fundamentals

Thursday, 17th December, 2009 02.00 P.M. to 05.00 P.M. Business Mathematics and Statistics Fundamentals

Day & Date Time Competency Level Part – II

Thursday, 10th December, 2009 09.30 A.M. to 12.30 P.M. Financial Accounting

Friday, 11th December, 2009 09.30 A.M. to 12.30 P.M. Applied Statutory Compliance

·Examination Fees

Foundation Course (Entry Level) Part – I Rs. 700/- Inland Centres

Competency Level Part – II Rs. 700/-

1. Application Forms for CAT Examination will be available from Directorate of CAT at "ICWAI Bhawan", 3,Institutional Area, Lodi Road, Delhi - 110 003. Cost of Form Rs. 30/- per Form.

2. Last date for receipt of Examination Application Forms without late fee is 25th October, 2009 and with late fee ofRs. 100/- is 4th November, 2009.

3. Examination Fees to be paid through Bank Draft of requisite fees drawn in favour of "ICWAI A/C CAT" payableat New Delhi.

4. Student will send their Examination Application Forms along with the fees to Directorate of CAT at "ICWAIBhawan", 3, Institutional Area, Lodi Road, Delhi - 110 003.

5. Examination Centres : Agartala, Ahmedabad, Allahabad, Asansol, Aurangabad, Bangalore, Baroda, Bhilai, Bhopal,Bhubaneswar, Bilaspur, Bokaro, Berhampur(Ganjam), Calicut,Chandigarh, Chennai, Coimbatore, Cuttack,Dehradun, Delhi, Dhanbad, Durgapur, Ernakulam, Faridabad, Ghaziabad, Guwahati, Hardwar, Howrah, Hyderabad,Indore, Jaipur, Jalandhar, Jammu, Jamshedpur, Jodhpur, Kalyan, Kanpur, Kolhapur, Kolkata, Kota, Kottayam,Lucknow, Ludhiana, Madurai, Mangalore, Mumbai, Mysore, Nagpur, Naihati, Nasik, Neyveli, Panaji(Goa), Patiala,Patna, Pondicherry, Pune, Rajahmundry, Ranchi, Rourkela, Salem, Shillong, Surat, Thrissur, Tiruchirapalli,Tirunelveli, Trivandrum, Udaipur, Vellore, Vijayawada, Vindhyanagar, Waltair.

6. A candidate who is fulfilling all conditions will only be allowed to appear for examination.

7. Probable date of publication of result : Foundation Course (Entry Level) Part - I is 1st February 2010 andCompetency Level Part - II is 20th February 2010.

C. BoseSr. Director (Examination)

Examination Programme


IFRS - The GlobalFinancial ReportingLanguageWith businesses turning global, it is important that investors are able to comparecompanies under similar standards. Likewise, it is important for businessesoperating in multiple countries to be able to create financial statements that areunderstandable in all of the countries they operate in. IFRS is a unified platformthat should lead to greater transparency, comprehensibility, usefulness for usersand comparability on a global scale. The question is whether the currentcomplexity of IFRS really supports this basic goal.

D. Muthamizh Vendan Murugavel*

*Lecturer, PG & Research Department ofCommerce, Gobi Arts & Science College,Gobi, Tamilnadu, India, E-mail: mvm_ [email protected]

Introduction

I nternational Financial ReportingStandards (IFRS) are standards,interpretations and the framework

for the Preparation and Presentation ofFinancial Statements adopted by theInternational Accounting StandardsBoard (IASB).

The IASB is a committee with 14members, from nine different countries,which work to develop globalaccounting standards. The goal of thiscommittee is to create global standardsthat are transparent, enforceable,understandable, and of high-quality.These members create the InternationalFinancial Reporting Standards that areused by so many countries around theworld. Each committee member has onevote for each of the standards that isvoted upon and this privately fundedgroup of accounting standards settersare based in London.

IFRS are used in many parts of theworld, including the European Union,Hong Kong, Australia, Malaysia,Pakistan, GCC countries, Russia, SouthAfrica, Singapore and Turkey.

As of August 27, 2008, more than113 countries around the world,including all of Europe, currently requireor permit IFRS reporting. Approximately85 of those countries require IFRSreporting for all domestic, listedcompanies. While some countriesrequire all companies to adhere to IFRS,others merely allow it or try tocoordinate their own country'sstandards to be similar. The IASB isworking towards this goal in apartnership with some of the mostinfluential accounting standard-settersacross the globe.

A financial statement, consolidatedor individual, prepared according toIFRS provides a view that is moreaccurate and fair. It is a unified platformthat should lead to greater transparency,comprehensibility, usefulness for usersand comparability on a global scale. Thequestion is whether the currentcomplexity of IFRS really supports thisbasic goal.

Importance of IFRS

IFRS is considered a "principles-based" set of standards in that theyestablish broad rules as well as dictatingspecific treatments. According to theIFRS, financial information should beunderstandable, relevant, reliable, andcomparable.

International Financial ReportingStandards is gaining momentumthroughout the world as a single,consistent accounting framework andis positioned to become thepredominant GAAP (GenerallyAccepted Accounting Principles) in thenear future.

The International AccountingStandards Board and the InternationalFinancial Reporting Standards that theyissue are very important for the futureof accounting. With businesses turningglobal, it is important that investors areable to compare companies under similarstandards. Likewise, it is important forbusinesses operating in multiplecountries to be able to create financialstatements that are understandable inall of the countries they operate in.

Eventually, InternationalAccounting Standards Board and otheraccounting organizations hope to see aconvergence of all accountingstandards throughout the world. Thistype of convergence, would allow forthe best of circumstances for investorsand other interested parties to be ableto examine and compare companies in atransparent and equal way. With thecoordination of the InternationalFinancial Reporting Standards (IFRS)with other accounting standards fromaround the globe, this goal ofconvergence may not be as far-fetchedas it may sound.

Benefits to Clients

Beyond the legal requirement to comply,Corporates in India perceive thatconverting to IFRS would help inenhancing their reputation andrelationships with the financialcommunity. Other benefits include,

n Increased consistency betweeninternal and external reporting

n Comparability with internationalcompetitors

n Increased access to internationalmarkets

n Improvement in risk rating

Recent developments in Finance


n Group-wide harmonization

n Improvement in planning andforecasting

n Support for management

IFRS in Indian Context

Globalization has helped IndianCompanies raise funds from offshorecapital markets. This has requiredIndian companies, desirous of raisingfunds, to follow the Generally AcceptedAccounting Principles (GAAP) of theinvesting country. The differentdisclosure requirements for listingpurposes have hindered the free flowof capital. This has also madecomparison of financial statementsacross the globe impossible. Amovement was initiated by anInternational body called InternationalOrganization of Securities Commissions(IOSCO), to harmonize diversedisclosure practices followed indifferent countries. The capital marketregulators have now agreed to acceptIFRS compliant financial statements asadmissible for raising capital. Thiswould ease free flow of capital andreduce costs of raising capital in foreigncurrencies. The policy makers in Indiahave also realized the need to followIFRS and it is expected that a largenumber of Indian companies would berequired to follow IFRS from 2011. Thisposes a great challenge to the preparersof financial statements and also to theauditors. There is an urgent need tounderstand the nuances in IFRSimplementations.

Indian Accounting Standards havenot kept pace with changes in IFRS.There are significant differencesbetween IFRS and I-GAAP, becauseIndian standards remain sensitive tolocal conditions, including the legal andeconomic environment.

Recognizing the significance ofhaving full convergence with IFRS, theICAI (Institute of CharteredAccountants of India) has decided toadopt a 'big bang' approach and fully

converge with IFRS issued by IASB,from accounting periods commencingon or after April 01, 2011 subject toregulatory approvals. ICAI hasundertaken a project to update allexisting Accounting Standards to becompatible with IFRS.The Ministry ofCorporate Affairs has also announcedits commitment to convergence to IFRSby 2011.

IFRS in India would cover thefollowing public interest entities in itsfirst wave.

l Listed companies

l Banks, insurance companies,mutual funds, and financialinstitutions

l Turnover in preceding year > INR 1billion

l Borrowing in preceding year > INR250 million

l Holding or subsidiary of the above

India needs to step up action to reapbenefits of IFRS convergence. For thispurpose, it is imperative that certainregulatory amendments take place suchas those relating to Schedule VI,preference capital, securities premiumaccount, depreciation, and so on, tobring them in line with the requirementsof IFRS.

Mr. Dolphy D'Souza, Partner &National IFRS Leader, Ernst & Youngsays "Without regulatory approvals thewhole thing will fall flat. Certainregulatory amendments have to betaken up quickly. IFRS is not only goingto help Indian companies benchmarktheir performance with globalcounterparts but also escape from filingmultiple reports for Indian companieswho have gone global."

Since India has adopted accountingstandards which are based on theinternational standards, conversion formost companies would entail passing afew more journal entries, in order totransform accounts as per Indian GAAPinto IFRS financial statements.

Impact of IFRS Convergence on IndianIndustries

A common myth about IFRS is thattransition is swift and painless. Butimplementing IFRS brings the need forchange in the format of accounts,different accounting policies and moreextensive disclosure requirements.Convergence to IFRS will greatlyenhance an Indian entities' ability toraise and attract foreign capital at a lowcost. A common accounting language,such as IFRS, will help Indian companiesbenchmark their performance withglobal counterparts. There will beescape from multiple reports for globalIndian companies that have to preparetheir financial statements under multipleGAAPs. With the knowledge of IFRS,the Indian Chartered Accountant wouldbe globally acceptable.

Issues Relating to IFRS

Firstly, many IFRS reports currentlyhave a strong national identity. Themain effect of IFRS has been on how acompany recognises measures anddiscloses items, not on the form orpresentation of the results. Companieshave adopted an approach thatminimises the changes from previousnational standards, reducing the ability,for example, to compare across anindustry.

Secondly, due to the gaps andinconsistencies within the body of IFRSstandards and the absence of industry-related accounting guidance, IFRSimplementation has required extensivejudgement to be used in the selectionand application of IFRS accountingtreatments, again reducing consistencyand comparability. IFRS is not based ona coherent, integrated set of principles,while some individual standardsspecifically permit alternativeaccounting treatments.

Thirdly, companies are notconfident that IFRS financialinformation is sufficient, or in somecases entirely appropriate, for the



purposes of communicating theirperformance to the markets.

Fourthly, IFRS financial statementsare significantly more complex thanfinancial statements based on nationalaccounting standards. This complexitythreatens to undermine the usefulnessof IFRS financial statements in makingdecisions. There is a real danger thatthe preparation of financial reports willbecome a technical compliance exerciserather than a mechanism forcommunicating performance and thefinancial position of companies.

IFRS - Challenges Specific to IndiaIFRS is a challenge that requires

close attention to detail across anendless number of issues.Conversionfrom Indian GAAP to IFRS requiressignificant efforts. The preparers, usersand auditors continue to encounterpractical implementation challenges.Conversion to IFRS is more than a meretechnical exercise. The consequencesare far wider than financial reportingissues and extend to various significantbusiness and regulatory mattersincluding compliance with debtcovenants, structuring of ESOPschemes, training of employees,modification of IT systems and taxplanning. Companies also need tocommunicate the impact of IFRSconvergence to their investors to ensurethey understand the shift from IndianGAAP to IFRS.

It is believed that there are only afew differences between Indian GAAPand IFRS. But it does not make theconversion efforts for Indian companiesminimal. Even though Indian GAAP isinspired from IFRS, there are significantdifferences between them especially inareas of business combinations, groupaccounts, fixed asset accounting,presentation of financial statement,accounting for foreign exchange andfinancial instruments, to name a few;Indian GAAP is still a long way behindIFRS. Most Indian companies tend tounderestimate the efforts involved toconvert to IFRS. As IFRS would becomeeffectively mandatory in 2010-11,

companies should start looking at theconversion process right now.

Early adoption of IFRS givescompanies the opportunity to anticipatechallenges, manage outcomes andimplement the best solutions. Withoutcareful study, the full impact ofconverting to IFRS will not be clear.Companies need to conduct adiagnostic study before proceeding fora full IFRS conversion. Aftercompleting the preliminary assessment,the management should prepare adetailed IFRS conversion programme.Given the enormity of the exercise,companies should consider a dedicatedteam that will work on the conversionexercise.

One key challenge in adopting IFRSis their use of fair value as the primarybasis of asset/liability measurement. TheIASB advocates its fair value approachon the grounds of relevance; the boardquite simply considers fair value to bethe most relevant measurement basis.The IASB has placed too muchemphasis on 'relevant' information andhas given insufficient consideration tothe other attributes of accountinginformation, in particular reliability andunderstandability.

IFRS in International ContextA worldwide consensus has been

building for many years on the need forhigh-quality global accountingstandards that would better serveinvestors and facilitate more efficientallocation of capital. This is why theEuropean Union (EU) introduced aregulation requiring all companies listedon a regulated market, including banksand insurance companies, to preparetheir consolidated financial statementsin accordance with IFRS from 2005onwards. EU member states have theoption to extend this requirement tounlisted companies and tounconsolidated financial statements.Till August 2008, more than 113countries around the world, includingall of Europe, currently require or permitIFRS reporting.

Many major stock exchanges across

the world today require or accept IFRSfinancial statements. It is expected thatmore than 150 countries would followIFRS by 2011. The US already allowsIFRS for foreign filers. More importantly,by 2011, it is expected that the US willfollow IFRS even for local filers. This isinevitable; else, the US may lose itscapital market advantage.

Brazil is expected to move in 2010,and Canada in 2011. "It is expected thatmore than 150 countries would followIFRS by 2011. The US already allowsIFRS for foreign filers. More importantly,by 2011, it is expected that the US willfollow IFRS even for local filers.

Risks in Introducing IFRSIf accounting entities under-

estimate the complexity of convertingto IFRS, there will be risks. As with anychange, introducing IFRS also has itsteething troubles. Primarily, these arethe absence of a quality regulatorybody, unclear tax legislation, andfrequent changes to IFRS itself.

Companies must approach IFRSimplementation responsibly. Theycannot present their financial statementas having been prepared according toIFRS but in reality focus only on thoseareas of IFRS where they think there isa major difference compared to theformer way of doing financialstatements.

Errors most often occur whenjudging non-standard trans-actions. InIFRS what is important is the economicsubstance of such transactions and notthe legal form.

Another problem arises whenmanagement decides to implement IFRStoo late. IFRS is then implemented undergreat time pressure, and this can causeerrors.

Implementing IFRS has increasedfinancial reporting risk due to technicalcomplexities, manual workarounds andmanagement time taken up withimplementation.

IFRS does not recognise theadjustments that are prescribed throughcourt schemes; consequently all such



items will be recorded through theincome statement. There are other areas,such as consolidation of specialpurpose vehicles and accounting forarrangements in the nature of a leasethat would require companies to recordtransactions on their books based onsubstance-over-form.

With IFRS, the complexity has beenincreased with the introduction ofconcepts such as present value and fairvalue. There are several recognition andmeasurement issues. Some of thesewould have cash tax liability or effectivetax rate implications. A change in thedefinition of equity could result in thetax benefits of hybrid instruments,where 'interest' is treated as receiving adividend.

Sec. 78 of the Companies Act, 1956permits writing off of preliminaryexpenses, underwriting commissionpaid or discount allowed on issue ofdebentures, premium payable onredemption of debentures etc. to beadjusted against securities premiumaccount. Treatment of such expensesis different in IFRS and in many caseswould result in a charge to the incomestatement.

Adopting IFRS do not have anyeffect on credit ratings. In the Europeanexperience, none of the accountingchanges arising from IFRS transition ontheir own resulted in changes in ratings.This is because business and financialrisk assessments do not undergo radicalchange due to the new informationdisclosed under IFRS. What doesreduce, however, is information risk- thefear of the unknown. It must also bebear in mind that, even today, ratingcompanies look beyond reported IndianGAAP figures and make adjustments.

No country can abandon its ownlaws. It will always check to see if theIFRS pronouncements are fit forapplication in the specific countryenvironment. There will always be a callfor an endorsement process. Hopefully,the economic imperative and theendorsement procedure will both push

for not having differences. Therefore, ifIndia does not have an active role inthe standard-setting processinternationally, converging to IFRS,using an endorsement process andpossibly accepting temporary carve-outs and quirks, is a safer route to take.

Under IFRS, companies would berequired to prepare consolidatedfinancial statements, and this wouldtherefore require their unlistedsubsidiary companies to preparefinancial information under IFRS. Theground reality is that small companiesand small accounting firms will find theimplementation of IFRS to bechallenging.

No widely accepted benefits ofimplementing IFRS emerged so far.

It is not clear how IFRS convergencewould be achieved in India. Firstly,whether it would be convergence oradoption (adoption may result in nil ornegligible departure from IFRS whereasconvergence may result in significantdepartures from IFRS).

Requirements for SuccessfulImplementation of IFRS

Successful implementation of IFRSwould require companies to fully useIFRS as their basis of daily primaryfinancial reporting, as well as forperformance tracking in the form offorecasts, budgets and managementaccounts.

IFRS requires industryspecialisation: There are no strongindustry-specific themes in IFRS,primarily due to the lack of significantindustry-specific guidance in IFRS andthe general reliance on legacy GAAP inareas such as revenue recognition.Consequently, implementation in othercountries has not revealed any visiblepattern in industry-wise adoption ofthese accounting standards. It isappreciable that IFRS is lessprescriptive and moves away fromprescribing specific accountingtreatment such as, say, accounting for

multiple deliverable arrangements in thesoftware services industry.

More work is required to improvedisclosures. It may be helpful forcompanies to view financial statementsnot from a compliance perspective butas a way of communicating andexplaining performance.

Tax authorities should considerIFRS implications on direct and indirecttaxes and provide appropriate guidancefrom a tax perspective. The Institute ofChartered Accountants of India shouldmake an all out effort to train andupgrade the profession in IFRS.

These milestones need to beachieved at the earliest; else the wholeconvergence exercise could get trappedin a hopeless tangle causing immensewaste of time, resources, capital andcause inconvenience for Indian entities.

Conclusion

IFRS is a principle-based approachwith limited implementation andapplication guidance. In the initial years,there will be immense learning andsubsequently, revisions would arisefrom the global implementation of IFRS.A plan that would require companies topublish IFRS financial statementseffective from April 1, 2011, without therequirement to present IFRScomparative information for theprevious year, would ease the economicburden of compliance. Theimplementation of IFRS requiresconsiderable change managementeffort, particularly in training financialstaff and enhancing the understandingability of non-financial staff. Thejourney to IFRS needs to be plannedand carefully executed at both companyand group levels, considering theimplications of accounting, taxation,information technology andorganisational change.

References

www.iasb.org , www.deloitee.comwww.asb.or.jp, www.google.co.inwww.kpmg.com,www.ey.com ,www.cab.org.inq



Introduction:

L imited liability partnership (hereafter LLP) concept wasintroduced in order to adopt a

corporate form, which combines theorganizational flexibility and tax statusof partnership with advantage of limitedliability for its partners. LLP is a bodycorporate formed and incorporatedunder the LLP Act, which is a distinctlegal entity separate from that of itspartners. It has perpetual succession.The word "Body Corporate" is definedin the Bill to include LLPs registered

Limited Liability Partnership:A new RevaluationDr. A. Selvaraj*K. Kannusamy**

*Reader in Commerce, PG & ResearchDepartment of Commerce, Gobi Arts &Science College, Gobichettipalayam - 638453.** Lecturer in Commerce, PG & ResearchDepartment of Commerce, Gobi Arts &Science College, Gobichettipalayam - 638453.

under the LLP Act, LLPs incorporatedoutside India, and Companiesincorporated outside India. Any changein the partners will not affect theexistence, rights or liabilities of the LLP.The Bill provides for entry of newpartners in accordance with LLPagreement and exit of existing partnersboth with due notice to the Registrar.The provisions of the Indianpartnership Act, 1932 has noapplication to LLPs.

Rationale of Limited LiabilityPartnership

In India, businesses mainly operateas companies, sole proprietorships andpartnerships. Each of these is subjectto different regulatory and tax regimesreflecting their organization andownership. Introducing LLPs, as a newbusiness structure would fill the gapbetween business firms such as sole

proprietorship and partnership, whichare generally unregulated and LimitedLiability Companies, which aregoverned by the Companies Act, 1956.In addition to an alternative businessstructure, LLPs would foster the growthof the services sector. The regime oflimited liability partnership will providea platform to small and mediumenterprises and professional firms ofCompany Secretaries, CharteredAccountants, Advocates etc. toconduct their business/professionefficiently which would in turn increasetheir global competitiveness.

The issue of Limited LiabilityPartnership (LLP) has been a matter ofdiscussion for many years - the AbidHussain Committee recommendedlegislation on LLP in 1997. Later, theconcept of LLP and the pressing needto introduce it in India found mentionin the report of Naresh ChandraCommittee (2003) set up on regulationof private companies. More recently, theJJ Irani Expert Committee on CompanyLaw (2005) recommended introductionof a LLP law. While Naresh ChandraCommittee preferred the application ofthe LLP to the service industry, IraniCommittee recommended that the smallenterprise should also be included inthe scope of LLP. In India need forintroduction of a L.L.P legislation wasfelt for a long time but the processgained momentum when 2 nd NareshChandra Committee submitted its reporton 23rd July 2005 and made the followingobservations: "In increasing litigiousmarket environment, prospect of beinga member of a partnership firm withunlimited liability is, to say the least,risky and unattractive. Indeed the chiefreason why the firms of professionals,such as accountants, have not grownin size to successfully meet thechallenge of the internationalcompetition. This makes an L.L.P a mostattractive vehicle for partnership amongprofessionals such as lawyers andaccountants." In the Committee's view,the scope of L.L.P. should be madeavailable to firms providingprofessional services, as opposed to

Limited liability partnership concept was introduced in order to adopt a corporateform, which combines the organizational flexibility and tax status of partnershipwith advantage of limited liability for its partners. LLP is a body corporateformed and incorporated under the LLP Act, which is a distinct legal entityseparate from that of its partners. Introducing LLPs, as a new business structurewould fill the gap between business firms such as sole proprietorship andpartnership, which are generally unregulated and Limited Liability Companies,which are governed by the Companies Act, 1956. In addition to an alternativebusiness structure, LLPs would foster the growth of the services sector. The regimeof limited liability partnership will provide a platform to small and mediumenterprises and professional firms of Company Secretaries, CharteredAccountants, Advocates etc. to conduct their business/ profession efficientlywhich would in turn increase their global competitiveness.

As per the international experiences of the countries like UK and USA, andof the recommendations of the various corporate law reforms committee (NareshChandra Committee 2003, JJ Irani Expert Committee on Company Law 2005)the long and eagerly awaited Limited Liability Partnership Bill 2006 was tabledin Rajya Sabha on 15th December 2006. The Bill, introduced by the Ministry ofCompany Affairs, is viewed as a path-breaking reform initiative. This articlehighlight, the Genesis of the LLP in Indian environment, main provisions of theLLP Bill, some taxation and accounting issues related with LLP.



trading firms, and/or manufacturingfirms for the reason it will help evaluateits advantage and risks; and based onsuch evaluation and experience, theL.L.P. form could be considered forextension to small-scale industries.

The Central Government, in themeanwhile appointed an ExpertCommittee on Company law under theChairmanship of J.J.Irani, its Reportrecommended as follows: "LimitedLiability Partnerships should befacilitated through a separateenactment. Companies Act need notprescribe limitations on the number ofmembers of other kinds oforganizations." In view of the potentialfor growth of service sector,requirement of providing flexibility tosmall enterprises to participate in jointventures and agreements that enablethem to access technology and bringtogether business synergies and to facethe increasing global competitionenabled through W.T.O. etc, theformation of Limited LiabilityPartnerships (L.L.Ps) should beencouraged. It would be a suitablevehicle for partnership amongprofessionals who are already regulatedsuch as company Secretaries, CharteredAccountants, Cost Accountants,Lawyers, and Architects, Engineers andDoctors etc. However, it may also beconsidered for small enterprises notseeking access to capital marketsthrough listing on stock exchange.

LLPs - International Experiences

The LLPs are very popular form ofbusiness in United States and UnitedKingdom. In the UNITED STATES1,Limited partnerships emerged in theearly 1990s; while only two statesallowed LLPs in 1992, over forty hadadopted LLP statutes by the time LLPswere added to the Uniform PartnershipAct (UPA) in 1996. In the United States,each individual state has its own lawgoverning their formation. Althoughfound in many business fields, the LLPis an especially popular form oforganization among professionals,particularly lawyers, accountants and

architects. UNITED KINGDOM2: TheLimited Liability Partnership is a recentinnovation of UK law, has beenintroduced by the Limited LiabilityPartnerships Act 2000. The Act becamelaw on 1/4/2001. In an LLP, all partnershave a form of limited liability, similar tothat of the shareholders of acorporation. However, the partners havethe right to manage the businessdirectly, and (in many areas) a differentlevel of tax liability than in a corporation.Under UK law, the LLP is a "fiscaltransparency". In other words, it is notsubject to taxation. Only the membersare liable to taxation.

Introduction of LLP in IndiaLimited Liability Partnership Bill

2006: The long and eagerly awaitedLimited Liability Partnership Bill wastabled in Rajya Sabha on 15th December2006. The Bill, introduced by theMinister of Company Affairs, is viewedas a path-breaking reform initiative. Notonly will the passing of the Bill bringthe Indian partnership law frameworkmore in line with international practices,it will provide an effective alternatecorporate business vehicle toprofessionals and enterprises keen toinstitutionalize their activities andgraduate to the next level. The mainobject of this new device is as "Withthe growth of the Indian economy, therole played by its entrepreneurs as wellas its technical and professionalmanpower has been acknowledgedinternationally. It is felt appropriate thatentrepreneurship, knowledge and riskcapital combine to provide a furtherimpetus to India's economic growth. Inthis background, a need has been feltfor a new corporate form that wouldprovide an alternative to the traditionalpartnership, with unlimited personalliability on the one hand, and, thestatute-based governance structure ofthe limited liability company on theother, in order to enable professionalexpertise and entrepreneurial initiativeto combine, organize and operate inflexible, innovative and efficientmanner."3 The Bill defines "limited

liability partnership" as a partnershipformed and registered under this Act.This stipulates two requirements: (a) apartnership; and (b) registration. Thus,the LLP would be a partnership and itsregistration under the LLP Act wouldbe compulsory.

The LLP Bill, 2006 is broadly basedon the UK and Singapore LLP Acts. TheCentral Government has retained thepower to make rules for carrying out theprovisions of the Act. The LLP Bill doesnot have provisions related to taxationof LLP, which are expected to beaddressed in the Income-Tax Act likeall other business entities. The Bill isdivided into XIV Chapters having 73Sections and Four Schedules. Thefollowing are the main provisions of theBill are as follows:

1. The LLP shall be a body corporateand a legal entity separate from itspartners. Any two or more persons,associated for carrying on a lawfulbusiness with a view to profit, mayby subscribing their names to anincorporation document and filingthe same with the Registrar, form aLLP. The LLP will have perpetualsuccession.

2. The mutual rights and duties ofpartners of an LLP inter se and thoseof the LLP and its partners shall begoverned by an agreement betweenpartners or between the LLP and thepartners subject to the provisionsof the proposed legislation. The Billprovides flexibility to devise theagreement as per their choice. In theabsence of any such agreement, theprovisions of law shall govern themutual rights and duties.

3. The LLP will be a separate legalentity, liable to the full extent of itsassets, with the liability of thepartners being limited to their agreedcontribution in the LLP, which maybe of tangible or intangible natureor both tangible and intangible innature. No partner would be liableon account of the independent orun-authorized actions of otherpartners or their misconduct.



4. Every LLP shall have at least twopartners and shall have at least twoindividuals as Designated Partners,of whom at least one shall beresident in India. The duties andobligations of Designated Partnersshall be as provided in the law.

5. The LLP shall be under anobligation to maintain annualaccounts reflecting true and fair viewof its state of affairs. A statement ofaccounts and solvency shall be filedby every LLP with the Registrarevery year. The accounts of LLPsshall also be audited, subject to anyclass of LLPs being exempted fromthis requirement by the CentralGovernment.

6. The Central Government shall havepowers to investigate the affairs ofan LLP, if required, by appointmentof competent inspector for thepurpose.

7. The law would confer powers on theCentral Government to apply suchprovisions of the Companies Act,1956 to provide, inter-alia, formergers, amalgamations, windingup and dissolutions of LLPs, asappropriate, by notification withsuch changes or modifications asdeemed necessary. However, suchnotifications shall be laid in draftbefore each House of Parliament fora total period of 30 days and shallbe subject to any modification asmay be approved by both Houses.

8. The Indian Partnership Act, 1932shall not be applicable to LLPs.Other entities may convertthemselves to LLP in accordancewith provisions of law.

9. The Central Government shall havepowers to make rules for carryingout the provisions of the proposedlegislation.

Taxation & Accounting IssuesThe aspect of tax treatment of LLPs

remains an area of uncertainty, since theBill states that an LLP will be treated asa firm as defined under the Income TaxAct 1961 for the purpose of taxation.

This show the way one to the followingtwo implications:

1. That on the same basis as anordinary partnership firm, the LLPwill pay tax on its profits afterdeduction of business expenditure,salaries and interest paid to thepartners. Partners will be liable topay tax on salary and interestreceipts, whereas the share in profitsis exempt; same as the currentprovisions of the income tax Act1961related with Firm.

2. Another way that only the profitsin the hands of the LLP partners willbe taxed. A L.L.P. will have Passthrough Status (proposed by theNaresh Chandra Committee); thepartners will be liable to pay tax onshare of LLP's profits received intheir hands. This also known as taxtransparency.

Of the above two options thesecond option appears to be logicaland acceptable on account of thefollowing two reasons : The NareshChandra Committee Report as well asthe Concept Paper on LLPs which wasreleased by the Ministry of CompanyAffairs in November 2005 had veryclearly recommended tax transparencyfor LLPs viz only the LLP partnersshould be subject to tax and not theLLP itself; The Bill has vide its FirstSchedule (CLAUSE No. 5) prohibitedpartners of LLPs from accepting anyremuneration. This implies that they willbe subject to Income Tax in respect oftheir share of profits received by them.

Naresh Chandra Committee has, said inits report that "the LLPs should begoverned by a taxation regime that taxesthe partners as individuals, rather thantaxing the LLP itself, i.e., the LLPs shouldbe treated in the same manner as thefirm under the tax laws". This is,however, contrary to the system oftaxation of firms under the I.T. Act.Presently, under the I.T. law, apartnership firm pays tax on its profitsafter deduction of business expenditure,salaries and interest to partners.Partners are then taxed on their salary

and interest, whereas, their shares in theprofits in the firm are exempt. Firms arenot exempt from tax. As per the FirstSchedule, no partner of an LLP shall beentitled to remuneration for acting in thebusiness or management. This, ofcourse will apply only if there is norequirement regarding remuneration inthe agreement constituting LLP. Hence,if no remuneration is to be paid, itsallowance in the hands of LLP andtaxation in the hands of the partnersshall not arise. However, practically it isdifficult that a partner working asworking partners and he will not get anysalary or commission for their works.Since the LLP is, visualize of as acompany as it is under the CompaniesAct, it would be just and logical to taxan LLP like a company and ignore theexistence of partners for tax purposeslike shareholders. If the partners receiveany income like interest from the LLP,the income so received would be taxablein the hands of the partners.

Even in under UK law, the LLP is afiscal transparency. In other words, it isnot subject to taxation despite being abody corporate with separate legalpersonality and providing limitedliability to all its members. Only themembers are liable to taxation. As themembers (statutory minimum of two)may be non-UK resident persons-including offshore companies-then itfollows that an LLP can trade in its ownright free of UK corporation tax liabilityoutside the United Kingdom. Similarly,in USA as in a partnership or limitedliability company (LLC), the profits ofan LLP are distributed among thepartners for tax Purposes, avoiding theproblem of "double taxation" oftenfound in corporations.

Concept of LLP:The following provisions regarding

taxation and accounting treatment oftransactions:-

(1) Income Tax and Capital Gains,for the purposes of taxation, anyactivity carried on by a limited liabilitypartnership with a view to profit shallbe treated as carried on in partnership



Ref. Exam/264/8/2009 August 17, 2009

NOTIFICA TION

The Examination Committee of the Council of ICWAI at its 264th meeting decided to fix the newexamination dates as follows :

December Term 10 to 17 December

June Term 11 to 18 June

Accordingly, The December 2009 examination of ICWAI will be conducted from 10 to 17 December2009.

C Bose

Sr. Director - Examinations

by its partners not by the LLP and,accordingly, the property of the limitedliability partnership shall be treated forthose purposes as property of thepartners. (2) Where a limited liabilitypartnership carries on a trade orbusiness with a view to profit- assetsheld by the limited liability partnershipshall be treated for the purposes of taxin respect of capital gains as held by itspartners; and any dealings by thelimited liability partnership shall betreated for those purposes as dealingsby its partners in partnership (and notby the limited liability partnership assuch), in respect of capital gainsaccruing to the partners of the limitedliability partnership on the disposal ofany of its assets shall be assessed andcharged on them separately.

With the above discussion, it is clear,that the provisions are not clear in theproposed LLP bill. In one way they areproposing application of currentprovisions of income tax act related withthe taxation of the Firm, on the otherhand they said that LLP will not weliable for tax, their partners are liable fortaxation, with the advantage of passthrough statues of LLP, which willcreate controversy at the time ofpractical application of law.

Conclusion:LLPs have been in trend in various

other countries such as UK, USA,Australia, Singapore etc. It is a form ofbusiness entity, which allows individualpartners to be restricted from jointliability of partners in a partnership firm.At present, this LLP bill is in form ofmini companies act. The Liability of thepartners incurred in the normal courseof business is that of LLP and it doesnot extend to the personal assets of thepartners.

This is a great relief to the partners,particularly professionals like CompanySecretaries, Chartered Accountants,Cost Accountants, Advocates andother professionals. These professio-nals may also form multi-disciplinaryLLPs to meet the changing economicenvironment. The Govern-ment of Indiashould create a facilitating environmentfor entrepreneurs, service providersand professionals to meet the globalcompetition. Along with that, it isnecessary to made suitable changes inthe provisions of income tax related withthe taxations issues, because taxationis one the major motivational factorother then limited liability for thepartners of LLPs. The introduction ofLLPs in India is a good beginningtowards a long journey. The hybridstructure of LLP will facilitateentrepreneurs, service providers andprofessionals to organize and operate

in an innovative and efficient mannerfor effectively competing in the globalmarket.

References:1. Ministry of Company Affairs (2005),

"Concept Paper on Limited LiabilityPartnerships", Press Note 5/2005 datedNovember 2005.

2. Ministry of Company Affairs (2005),Concept Paper on Company LawReforms Dr. J.J. Irani Committee onCompany Law, May.

3. Ministry of Finance and CompanyAffairs (2003), "Naresh ChandraCommittee-Second Report onRegulation of Private Companies andPartnerships", Academic Foundation,Economical India, 2004, Page 87-96.

4. Institute of Company Secretaries ofIndia (2005), "Seminar on ConceptPaper on Limited Liability partnershipsLaw", PHD Chamber of Commerce,New Delhi, December 17, 2005.

5. Ministry of Company Affairs (2006),"Limited Liability Partnership Bill2006" Presented in Rajya Sabha on 15Dec 2006.

6. Kothri Vinod & Mukerjee Samik (2005):"Irani Committee Report-An Analysisof Corporate Law reform in India" TheChartered Accountant Vol 54 No1 July.

7. Jhaveri Shreyas & Sithapathy Vinita(2006): "Limited liability partnership:An insight", The Chartered AccountantVol. 55 No 3 September.

8. www.mca.gov.inq



What is a brand?

Abrand name can be a term, symbolor design or combination thereofthat identifies and differentiates

a seller's products or services from otherproducts available in the market. Once abrand name is marked or embossed on aproduct; it positively indicates that thisis a product of the company whose brandname is embossed on it. In other words,brand name is a linkage of the productwith its brand name owner. If a productis not branded, it is like an orphan. It hasinferior marketability in comparison to abranded product as it has none to lookafter its interests. As credit or discreditfor good or bad performance of a brandedproduct goes to the brand owner, he isexpected to assure its performance tothe satisfaction of the customers at theirplaces by manufacturing quality productand assuring its performance by makingappropriate arrangements. A continuouspositive approach and action in thisdirection over a period of time assuresconsistent rise in demand of the productfrom the customers leading todevelopment of a scenario known ascustomer loyalty. This process adds tothe good will of the product and therebybuilds its BRAND EQUITY. On the otherhand, poor performance of the productand rendering of poor after sales servicesin relation to such a product during thewarranty period and thereafter leads toshrinkage of market share. Such a post

About Entrepreneurs,Brands and Brand EquitiesK R Bhargava*

sales behavior of the brand owner is notacceptable to the customers as they payhigher price for the product purchased;having been disenchanted with thebrand that used to be once their favorite,they shift to other brands available inthe market. This trend slowly leads todecline in Brand Equity of the product.

The Brand Equity of a brandedproduct can be measured in terms of thefollowing equation:

Brand Equity= Market Price of thebranded product-Market Price of thecomparable unbranded product-Advertisement and Sale PromotionExpenses.

The Brand Equity can also decline ifa brand owner resorts to businesspractices that are unethical in nature forpersonal gains. Satyam Computers caseis latest in this regard.

How to increase Brand Equity?

We often see in the market that certainbrands are costlier than others fordifferent reasons. These brands in themarket are known as Luxury brands, HighEnd brands, Premier brands etc. Peoplebuy the branded products dependingon their personal choice and affordability.Some consumers prefer to buy productsof top brands irrespective of their price.Manufacturers tend to reach allconsumers by designing, packaging andmarketing their products in such mannersthat appeal to large range of consumers.As needs vary from person to personand area to area depending on variousfactors, therefore, for:-

1. increasing their market reach;

2. assuring continuous growth inrevenues; and to

3. mitigate their risks companiesdiversify in range of their productsto satisfy needs of differentsegments of the communities.

The efforts to reach the targetsegments of the large consumer basehave to be effective and continuous andperiodically reviewed to see theperformance of the strategies. If amanufacturer / brand owner succeeds tosecure growth in revenues andcustomers' loyalty to a significant levelover a period of time for a broad range ofhis products, we can say he is on thepath of building Brand Image of his firm.A strategic businessman, to make hisbusiness strategies successful, will firstassure that he manufactures defect freeproducts for trouble free performanceduring the warranty period and lateraddresses customers' complaints, if any,to their satisfaction to retain their loyalty.

In a dynamic competitive market, it isnecessary to make consistent efforts tobuild long term association withcustomers by providing them efficient,cost effective and trouble free servicesto meet their ever changing needs. Agood response of the brand owner inthis regard helps him to build his BrandEquity. And these strategies are put totest when users of a particular brand,later in life, go to the market for a changeof their existing products or for purchaseof some other products; if they prefer tobuy and in fact, buy new products oftheir old favorite brand, it can beconfidently claimed that company hassucceeded in retaining their oldconsumer base. Depending upon theinitiatives and efforts made to createbrand popularity and retain brand loyaltyamong consumers; a brand owner cansucceed in enhancing his Brand Valueand can succeed to raise funds from the

*The author is Chief Commissioner ofCustoms. Mumbai-Zone II, Jawaharlal NehruCustom House, Nhava Seva, Raigad. Viewsexpressed are personal and comments can bemailed at kuldiprbhargava @hotmail.com



market in response to his Initial PublicOfferings / Public Issues for expandingor diversifying his business.

A brand owner must remember thatadvertising or sale promotion measuresalone cannot help in building BrandEquity, quality and performance of theproduct plays a very critical role. It mustperform to the consumer's satisfactionotherwise visible reputation is only abubble. If consumer does not get thevalue for the money paid, he will neitherrevisit the Show Room nor the brand. Afriend of mine who went to a reputedShow Room near Law Garden, in March,2009, in Ahmedabad says as follows:

"I bought two T-Shirts of a reputedbrand; after second hand wash, lengthand width of one of these had increasedby 20 %. I can't use this. I have taken vowto follow the principle of-No NeverAgain in regard to this brand. It is betterto go to Sarojini Nagar market in NewDelhi where you will get a product thatwill give you full money value."

Secrets behind a successful brand:

A sustained positive behavior of thebrand holder in producing qualityproducts will lead to consistentimprovement of his brand image andthereby leading to ever increasingconsumer base. He must note that peopledo not have time to re-indulge and re-engage with you to try you again andagain when alternatives are available inthe market. You cannot afford to becomplacent. You have to be innovativein your strategies keeping alwayscustomer's interest at the centre. Youhave to ensure that he makes full use ofyour product by using it correctly andgets full value for his money. It must bekept in mind that it is customer that isking and not cash is the king. Cash comesfrom the customer; so, service him betterto have ever increasing cash flow. Thiswill help your firm to build higher BrandEquity.

And when you are popular andneighbor's envy, you have to be vigilantbecause there can be strategies as wellconspiracies to displace you from thetop position or even to acquire you. Soyou have to be constantly alert in yourinternal and external environment; notonly to sustain your leadership positionbut also to further increase your marketshare or to face an aggressiveacquisition. You will, therefore, need todevelop a good intelligence apparatusto face these challenges and to developappropriate business strategies to havean upper hand in the market. At times,your arch rivals may not be your knowncompetitors but even unknown smalltimers can give you tough time; theseguys may counterfeit your products andpose threats to your business or theycan resort to other unethical practices toeat your market. The presence of suchplayers in your marketing territory maynot only affect your volumes andrevenues but bring disrepute to yourbrand. Therefore, you need to takeadministrative, legal and otherinnovative measures to identify suchentities and their products not only tosustain credibility of your brand butinterests of your loyal customers andcommunity at large. The case to quote,at this juncture, is of a major IndianBusiness House manufacturing ShavingCream under their family brand namefacing tough challenge from an unknownmanufacturer with unregistered BrandName -V-Mohan (Name Changed). Thequality of both products was comparablebut selling price of V-Mohan was lessthan half of the Premier Brand. Since V-Mohan was eating their market, theygathered market intelligence and foundthat this small player had not beendischarging excise duty even on half ofthe production. They informed the lawenforcement authorities and not onlyprotected their own interest but interestof the community too.

As mentioned above, it takes hardwork of years for the new entrepreneursto build a strong brand in pursuance totheir vision. They face many challenges,many ups and downs before theysuccessfully establish their name in themarket. In beginning, they lack resources,friends, market knowledge, technicalknow how, correct awareness of the legalframework of the prevailing environmentetc. They are also unknown in the newworld and there is always fear of failure;but in spite of all these odds, manysucceed. And those who succeed arecourageous, willing to take risk,unstoppable in their mission,strategically convert threats intoopportunities and succeed to realize theirvision and become role model for others.We often find many people complainingthat independent India remained under-developed because of its controlledeconomic regime or License Raj. But tomany enterprising spirits, this scenariodid neither deter, nor could dishearten,or stop their journey in realizing theirvision. They looked for opportunities inthat difficult scenario only to realize theirdreams. Dhirubhai Ambani founder ofReliance Industries who left a businessempire of Rs. 990 bn for his people tomanage started his career as a PetrolPump boy; while working at this site, hedreamt to create a business empire. Heestablished first Textile Plant of RelianceIndustries at Ahmedabad in 1966 andusing the contemporary legal frameworkgot converted this plant in 1973 into aManufacture in Bond facility under theCustom Act, 1962; a status that can beconsidered at par with current units inSpecial Economic Zone. The companycould import duty free raw materials formanufacturing fabrics for export purposeand availed this and other exportschemes effectively to increase thebusiness within India and beyond India.In1977- 1978, Reliance imported Partially



Oriented Yarn (Polyester) formanufacture of fabrics and soon realizedthe necessity of backward integrationand in 1982 established their own POYplant at Patalganga. The process ofbackward integration went on insubsequent days also not only to meettheir own demand but of the Indianindustry also. As a visionary, Mr. Ambanirealized the importance of 90 % / 10 %Principle of Stephen Covey and,therefore, rather than cribbing andfinding faults with the prevailingenvironment; he scanned theenvironment carefully, did SWOTanalysis, developed appropriatestrategies to deal with stakeholders,employees and others. He faced thechallenges by leading, guiding and usingtalent of his men and availed theopportunities to grow, making sure thatpeople associated with them also grow.In course of this process, not onlyReliance flourished but it shared itswealth with other stakeholders also. Thisapproach to business always assuredreliance to increase its shareholder basefor future businesses. To furtherappreciate his strategic acumen, we mayrecall that though in seventiesAhmedabad was known as Manchesterof India having so many composite textilemills but it is only Reliance that made useof the aforesaid legal provisions of theCustoms Act, 1962 to establishManufacture in Bond facilities to growin domestic and overseas market at lowercosts.

There have been many stories similarto the preceding one in our past andpresent environment. And on the basisof these stories, we have identified sometips for our readers to follow forpromoting themselves, their productsand their organizations as BRANDS tobe reckoned with. The only thing toremember is that at the base level of allhuman achievements is vision and

entrepreneurship of human talent. It isthe human being who can dream to fly;it is human being who can think how tofly; and then, only he can think how tosustain the flight. And this happenswhen you use your talent and talent ofthose who are around you. Anotherpoint to remember is -Vision andEntrepreneurship do not relate tobusiness of producing and marketing ofcommercial goods and services alone.These relate to all areas of humanactivities. So, tips for a buddingentrepreneur in any field are:

i. he must have a vision of his own;and if he is working in anorganization, he can create his Visionwithin the over all frame work ofOrganizational Vision;

ii. he should be ready to take reasonablerisks; and should set goals for hispeople;

iii. he ought to be a person of strong willand confidence to realize the visionnot withstanding the strength ofdifficulties that may come acrossduring the journey;

iv. he must not crib about unfavorableenvironment but should look foropportunities and supporters in itand beyond it to overcomedifficulties;

v. he needs to be strategic in operationsand must endeavor to seek supportof everyone;

vi. he should not wait for a big break orbig opportunity but should be readyto make humble beginning withavailable resources;

vii. he must be willing to burn midnightoil till his vision is not realized;

viii.he must be egoless and keen to buildrelationships and partnerships withpeople of different cultures to carryhis mission forward;

ix. he must not indulge in blame game in

the face of failures but should admitmistakes, learn from experiences andredesign H.R. and operationalstrategies to achieve goals;

x. he should be strategic and good incontinuous internal audit of himself,his people, processes, products andstrategies to see that all things fall inline at the desired time ; the auditingprocess will not afford him to becomplacent;

xi. he should share his wealth,achievements and joys with histeams, friends and associates andcontinue to grow in ever changingenvironment.

Entrepreneurship produces amazingresults and there is enough evidenceavailable in history. We often hear thatin market X is a premium brand, Y is aLuxury brand and Z is a market leader;and undoubtedly, it gives greatsatisfaction and sense of pride to thepeople associated with these brands butachieving these heights had not beeneasy and once achieved, theseentrepreneurs did not rest; theycontinued their efforts to sustain theirleadership position. And, we note thatall these efforts give huge success andsuccess gives huge dividends to theorganizations, their entrepreneurs andall associated with them. Outside peoplelook forward to have association withthese great people and these greatorganizations in one or the other form tohave good Return on Investments, theyare willing to make. We have names suchas TATA, Sony, Nokia, Microsoft,Infosys, Raymond, L G, Reliance, T C S,G.E., I B M and many more who commandrespect in the market not only from theconsumers of their products but from allstakeholders associated with them.

The promoters of the premier brandsand teams led by them must have toiledday and night to bring these



organizations at their current level ofrepute and scale. For producing thesebrands of national and internationalrepute, promoters needed talented,committed, skilled, hardworking,effective and innovative people in theirorganizations; without them, the presentheights could not have been achieved.Some of these employees too werereputed brands in themselves; andundoubtedly world class organizationsneed world class employees. As we see,many Fortune Companies prefergraduates from reputed Managementand Engineering Institutes. In India, IIMand IIT graduates are preferred overgraduates of other Institutes becausethese graduates are products ofinstitutes that have huge BRAND valueand produce quality people. Thoughgetting admission to these Institutes isextremely difficult but life is not easythereafter also. Strategic hard work,commitment, devotion, desire to exceletc shown by the students at the time ofseeking admission to these Instituteshave to continue thereafter during andafter the study days. We can certainlysay that being a top brand or product ofa brand is not enough, product has toperform to sustain its own and itsproducer's Brand value. It is only longterm quality performance of the productsthat enables the promoters to establishthemselves as a durable and reliableBRAND in the market. The same logicapplies to all young men and womenwho want to achieve grater heights intheir career. Being a product of a reputedinstitute or having been selected througha competitive examination is not enough.They must deliver as expected by theirorganizations. In order to realize theirown vision and expectations of theirorganizations, they must follow the leads/ path shown by great entrepreneurs inhistory who made their organization asone of the greats.

Individual as a 'brand':

To explain the concept of individualas Brand, we may discuss classical caseof Indian Premier League. Though, it hasa short history but it has become a hugesuccess in sports / cricket circle. It is anext level of entrepreneurship. It isentrepreneurship of brands of repute.The organizers, team owners and playerswho participate in it are brands in theirown right; and people of all walks of lifeare willing to spend money on them inwhatever they do. In this League, teamowners invest huge sums of money toselect best players for their teams. And,we see in auctions cricketers areauctioned like commodities and they arepurchased on the basis of their Brandvalue. X cricketer is auctioned for Rs. 20Million, Y for Rs. 15 Million, Z for Rs. 7Million and so on. The auction price isas per their brand equity / brand value.The brand value can be measured interms of money they get as a BrandAmbassador or the money they get fromBCCI. For enhancing their Brand value,each cricketer is required to consistentlyperform in the cricket field. If heconsistently fails to perform, his brandvalue goes down. His products are Runs,Centuries, Fifties, Sixes, Fours, Wicketsand Catches etc besides his attitude,teamwork, leadership skills,temperament, conduct, commitment etcon and off the field. Higher the rankingon these indicators greater will be thebrand value. Based on this Brand Value,Tendulkar, Dhoni and others get contractfrom BCCI and further based on suchvalue of higher equity, some of them gettheir assignments as Brand Ambassadorof highly reputed national andinternational brands. This status of anindividual can be termed as Next Level ofEntrepreneurship.

Taking the discussion forward, we

may say that for an actor besides histalent, acting skills, photogenic looks,attitude, conduct, temperament, values,etc, number of hit movies he or she hasgiven will determine his brand value. Fora doctor, besides his qualifications,experience, attitude, commitment topatients etc, number of successfulsurgeries he has performed willdetermine his Brand value. Based on thisvalue, he will be in demand in hospitalsand among patients. For an employee, inan organization, be it corporate orgovernment, besides attributes likeintelligence, technical know how,managerial and leadership skills,discipline, sincerity, commitment,integrity, attitude etc, results he or shedelivers in terms of responsibilitiesassigned will determine his Brand value.If he or she has been a consistentcomprehensive performer, they are likelyto commands good reputation; in otherwords, good Brand value within theorganization. Thus according to us,budding cricketers, actors, doctors andemployees in organizations are alsoentrepreneurs in their respective areasof activity who have to consistentlywork hard and innovatively deliver intheir respective fields to grow as oneamong the best in their respective fields.They need to create a vision of their ownto become a brand and prove their brandvalue by delivering in terms ofexpectations of their employers. If theyfollow xi points mentioned herein aboveseriously and with sincerity, they arebound to become BRAND of huge repute.If their organizations also put catalyticstrategies in place to groom them as futurebrands, results can be wonderful; andaccording to us, these organizationsshould do so because these enabledemployees will create value for thecompanies / organizations leading toenrichment of the Brand Equity.q



Carbon EmissionReduction trading inIndia: Offsetting theDanger of Carbon Credit

Dr. Barnali Chaklader*Introduction

W ith growing concerns amongnations to curb pollutionlevels while maintaining the

growth in their economic activities, theemission trading (ET) industry hasbecome active. The ecological footprintshows that, despite the fact that one-fifth of the population in Asia still liveson less than US$ 1 per day (PPP-adjusted), the region is already livingbeyond its ecological carrying capacity(Zhang, 2006). As per Multi CommodityExchange of India, with the increasingratification of Kyoto Protocol bycountries and rising socialaccountability of polluting industries inthe developed nations, the carbonemissions trading is likely to emerge asa multibillion-dollar market in globalemissions trading. Carbon credits are atradable permit scheme. They provide away to reduce greenhouse gasemissions by giving them a monetaryvalue. A credit gives the owner the rightto emit one tonne of carbon

Associate Professor (Finance &Accounting), Institute of ManagementTechnology (IMT), Ghaziabad

dioxide.Carbon credit trading was firstbought to the public’s attention inKyoto 1996 with the development of theKyoto Protocol. The Kyoto Protocoloutlined targets for reduced carbondioxide emissions and ways that thesereductions could be achieved. Part ofthe Kyoto agreement says that if onedoes better than its emission target, itcan sell its carbon credits to those whocannot meet its emission targets. Theultimate success and credibility of theKyoto Protocol, or any future climateagreement, depends on whether most,if not all Parties, meet their greenhousegas emission reduction commitments.Kyoto Protocol Article 18 calls on toapprove “procedures and mechanisms”to determine and address cases of non-compliance, including the developmentof an indicative list of consequencestaking into account the cause, type andfrequency of non-compliance (Hargraveet.al, 1999). Under the Kyoto Protocol,developed countries, mostly in Europeagreed to cap green house gas emissionbetween 2008-2012 to an average of 5.24percent below 1990 levels. Companythat fail to meet these targets can offsettheir excess emissions by investing in

clean tech in developing countries orpurchasing certificates if emissionreduction from projects such as energyprojects and hydroelectric power plants.About 60 to 70 percent of green housegas emission are created by fuelcombustion in industries like cement,textiles, steel, fertilizers and power. Onemethod suggested to reduce carbondioxide was carbon credit trading.

Cap and Trade system for reducinggreen house gas emission

Green house gases refer to severalgases recognized by scientists as en-hancing green house effect. The mostimportant of these in terms of their glo-bal contribution to climate change arecarbon dioxide and methane. “Cap” isthe quantitative limit of emission that isimposed by a regulator on a region, acountry and a set of sectors. The cap isusually expressed in terms of certainamount of green house gas emissionpermitted to be emitted in one year. Thecap is then broken down into allow-ances and then these allowances aredistributed to each of the entities thathave the legal obligation to comply withthe cap. Each allowance correspondsto one unit of emission. At the end ofthe emission accounting period, eachentity with a compliance obligation willneed to hold allowances that are at leastthe same in number as its actual emis-sions in the period. The concerned com-pany has to decide as to whether itwould be beneficial for them to buyemissions or to devise ways and meansto reduce emission by implementingchanges in their operations. Carbontrading is one of the ways to meet envi-ronmental objectives.

Carbon TradingCarbon credits can be created from

projects that either sequester carbondioxide or other greenhouse gases orsave greenhouse gases from being emit-ted using new technologies. Reducing“carbon footprint,” or the amount ofenergy one consumes, starts with buy-ing carbon credits. The major sourcesof supply are India, China and Brazil.(www.mcxindia.com). Emissions trading

With growing concerns among nations to curb pollution levels while maintainingthe growth in their economic activities, the emission trading (ET) industry hasbecome active. As per Multi Commodity Exchange of India, with the increasingratification of Kyoto Protocol (KP) by countries and rising social accountabilityof polluting industries in the developed nations, the carbon emissions trading islikely to emerge as a multibillion-dollar market in global emissions trading.Carbon credits are a tradable permit scheme. They provide a way to reducegreenhouse gas emissions by giving them a monetary value. Carbon EmissionReducation is treated in the derivative trading market as a commodity. In Indiathis is new commodity to be traded in Indian derivative market. It started tradingin NCDEX, India from the month of April, 2008.

Emerging Trends in Finance


(ET) is a mechanism that enables coun-tries with legally binding emissions tar-gets to buy and sell emissions allow-ances among themselves. Currently,futures contracts in carbon credits areactively traded in the European ex-changes. In fact, many companies ac-tively participate in the futures marketto manage the price risks associatedwith trading in carbon credits and otherrelated risks such as project risk, policyrisk, etc. However, critics say that thistheory suits a lot of people as wealthycorporations saw it a way to buy offtheir obligations to reduce emission(Brown, 2006).

There is a growing recognition ofcarbon as a soft commodity that can betraded as carbon credits and in the formof other complex financial products,such as derivatives and exchangetraded funds.

India, being one of the leadinggenerators of CERs through CleanDevelopment Mechanism, has a largescope in emissions trading. A CER isequivalent to one tonne a year ofreduced carbon dioxide – equivalentgreenhouse gas generated by aninvestment in a developing nationcertified by the United Nations.

Currently, the total registered CDMprojects are more than 300, almost 1/3rdof the total CDM projects registeredwith the United Nations FrameworkConvention on Climate Change(UNFCCC). The total issued CERs withIndia as a host country till now stand at34,101,315 (around 34 million), againaround 1/3rd of the total CERs issuedby the UNFCCC. Further, there has beena surge in number of registered projectsin India. In 2007, a total of 160 newprojects were registered with theUNFCCC indicating that more than halfof all registered.

About 60 to 70% of GHG are createdby fuel combustion in industries likecement, textile, steel and fertilizers, apartfrom power. But bureaucratic slot andlack of awareness on ways of monetizingcarbon credits has resulted in manyIndian companies losing an

opportunity (source: http:// www.Carbon creditworld.net/news.html).

Carbon market is not just the fastestgrowing market but also one of the mostvolatile markets. International investorsin offset projects discount CERs comingfrom various sectors, regions andcompanies in India on the basis ofperceived risk of default in actualdelivery of CERs under the CDMprocess, access of the seller to alternatemarkets, size of the project, level ofdesperation and holding capacity of theseller, the quality of source of CERs etc.In India this is particularly true for Smalland Medium Enterprises (SMEs) whichare subjected to due diligence requiredby volume buyers. Now, there is anincreasing tendency in Indian projectproponents to develop theirindependent projects without priorEmission Reduction PurchaseAgreements with parties from thedeveloped countries and sell CERs asand when prices are favorable.However, in doing so, they are exposedto the international price movement forwhich they need to hedge theirpositions. Government of India notified“Carbon Credits” as a tradablecommodity on commodity exchanges inits notification dated 4th January 2008.Indian companies generate CERs fromemission offset projects which can beused by the international entities to meettheir emission reduction commitmentunder Kyoto Protocol or any regionalemission trading scheme such asEuropean Union Emission TradingScheme (EU-ETS).

In developing countries like Indian,the emission norms are much below thetarget fixed by Kyoto Protocol. Theyare entitled to sell the surplus credits todeveloped countries. The Europeancountries and Japan are the majorbuyers of carbon credits. Thus thisrewards those countries that meet theirtargets. India is considered as thelargest beneficiary claiming about 31percent of the world carbon tradethrough Clean DevelopmentMechanism(CDM). (21st September,2005 Telgraph).

Derivative Market in Carbon EmissionReduction

Futures and options markets arederivative markets (though certainlynot the only types of derivativeproducts), which means that they existin relation to spot markets, which arethe underlying primary markets in whichactual physical commodities are boughtand sold. Because futures and optionscontracts allow for the delivery of theunderlying commodity upon expiration,there is a strong tendency for spot,futures and option prices to move inthe same direction and react to the sameeconomic factors. Companies enteringinto forward contracts are those whofeel that prices may fall in the future.

The future market in CER wouldenable buyers and sellers of CERs todo price discovery and hedge their pricerisk on the commodity derivativemarkets. In the absence of a pricediscovery mechanism, sellers neitherhave information on the optimal valueof their CERs nor are able to get desiredvalue for their CERs.

Background and objective of the studyThe trading of Carbon credit started

in NCDEX commodity market from April2008. NCDEX is a public limitedcompany incorporated on April 23,2003 under the Companies Act, 1956. Itobtained its Certificate forCommencement of Business on May 9,2003. It commenced its operations onDecember 15, 2003 regulated by forwardmarket commission. Since the CERtrading started in the NCDEX spot andfuture market, it was attempted to findout a causal link between the two. Thatis, whether spot market affected theprice of future market of CER andsimilarly whether there is a causal effectof future market on spot market.

Objective of the StudyStudy whether causality exists

between CER spot market and CERfuture market and vice versa.

Research MethodologyThe daily closing data of NCDEX

CER spot index and NCDEX CER future



PP Test Statistic -0.977161 1% Critical Value*

-3.4613

5% Critical Value

-2.8747

10% Critical Value

-2.5737

*MacKinnon critical values for rejection of hypothesis of a unit root.

PP Test Statistic -1.00154275504

1% Critical Value* -3.4613436

2768 5% Critical Value -

2.87466019349

10% Critical Value -2.573698 56145

PP Test Statistic -15.14719 1% Critical Value* -3.4615 5% Critical Value -2.8747 10% Critical Value -2.5737

*MacKinnon critical values for rejection of hypothesis of a unit root.

index from April 10th, 2008 till December28th, 2008 was taken. A stationarity testwas conducted by plotting graphswhich showed that the data in both thecases were non stationary. A unit routetest through Phillips - Perron test wasconducted at level which again showedthat the data are non stationary. GrangerCausality test was conducted afterconverting the non stationary data asstationary at first difference.

Data AnalysisBefore carrying out the relationship

between NCDEX CER spot index andNCDEX CER future index from April10th, 2008 till December 28th, 2008, thestationarity of each series wasinvestigated by employing the unit roottests developed by Phillips and Perron.This was then verified by Phillips &Perron test (PP test). Phillips & Perron(1988) suggested an alternativeapproach for checking the presence ofunit roots in the data. They formulateda non-parametric test to theconventional t-test, which is robust toa wide variety of serial correlation andtime dependent heteroscedasticity.

The PP unit root test requiresestimation of the following equation(without trend).

X X ut ti

T

t T t= + +=

−∑µ1

…(1)

The bias in the error term resultswhen the variance of the true population

σ 2 1 2=→∞

−

TTE T Slim ( ) …(2)

differs from the variance of the residualsin the regression equation:

σuT t

T

tT E u2 1

1

2=→∞

−

=∑lim ( ) …(3)

Consistent estimators of s2 and s2u are:

S T uut

T

t2 1

1

2= −

=∑ ( ) ; and

S T u TTkt

T

t2 1

1

2 12= +−

=

−∑ ∑( )

…(5)

u ut

k

t j

T

t t j1

1 1= = +−∑ ∑

…(4)Where k is the lag truncation parameterused to ensure that the autocorrelationof the residuals is fully captured. It canbe seen from equation (4) that whenthere is no autocorrelation the last termin the formula defining S2

Tk is zero and

s2u = s2.

The PP test-statistic [Z(tm)] under thenull-hypothesis of I(0) is

( )Z t S S t S Su tk tk u( )µ µ= − −12

2 2

( )S T Y Ytkt

T

t t−

=

−

−

∑2

21

2

112

Since our null hypothesis was p = 1 andtable I and table II show that the PPtest statistics is less than the criticalvalue. Therefore null hypothesis isaccepted and our data series is nonstationary. To avoid spurious

Table IPP unit route test on CER spot prices at level

Table IICER PP test of future prices at level

6

Table IIICER PP Test result of spot prices at first difference

Table IVCER PP Test results of future prices at first difference

Phillips-Perron Test Equation Dependent Variable: D(SER01,2) Method: Least Squares PP Test Statistic -13.55376 1% Critical Value* -3.4615

5% Critical Value -2.8747 10% Critical Value -2.5737

MacKinnon critical values for rejection of hypothesis of a unit root. M



regression we have taken the firstdifference of the data and the followingtable III and table IV show the resultsthus obtained. Here these calculatedvalues are greater than the table valueand we find that both the data seriesare stationary at first difference.

Data Series Subjected to GrangerCausality Test

Thus the data series were convertedto stationary data to test GrangerCausality Test.

Granger (1969) causality testbetween X

t and Y

t which are stationary,

i.e. I(0) can be expressed as:

Yt = b

0 + åa

jX

t-j + åb

jY

t-j + U

t (6)

Xt = c

0 + åc

jX

t-j + åd

jY

t-j + V

t (7)

Where Ut and V

t are mutually un-

correlated white-noise series. In orderto test the pattern of causality, it isnecessary to test equations (6) and (7)and test the null-hypothesis thata

j=d

j=0 for all j (j=1,…, m) against the

alternative hypothesis that aj and d

j are

not equal to zero for at least some j’s.Acceptance of null-hypothesis implieslack of causal relationship between Xand Y. Just as the acceptance of a

j=0

implies that X does not cause Y,acceptance of d

j=0 implies that Y does

not cause X.

As the objective was to explorewhether causality exists between CERspot market and CER future market andalso whether causality exists betweenCER future market and CER spot market,I conducted Granger Causality test andfound that CER future market Grangercauses spot market as our calculatedvalue of F statistic is more than ourcritical value. It is clearly evident fromtable V, VI and VII that although CERfuture market is correlated with spotmarket but CER spot market is notcorrelated with CER future market as inthe later case F statistic is less than thecritical value. (Read ser 02 as futuremarket and ser 01 as spot market in tableV, VI and VII) Lag of 2 in our test was an

automatic information criteria. The lagswere increased to 3 and 4 and similarresult was obtained.

Conclusion

It has been observed in the past thattrading of commodity future marketbrings changes in the spot market inthe form of spiraled prices ofcommodities. That was the reason forbanning of commodity likes potatoes,chick pea, oil, Soya bean, rice grain inthe future market. The same trend isobserved in CER NCDEX market for theperiod I have chosen for my study. Wecan conclude that trading and changesin prices in CER future market can bringabout changes in CER spot market.

ReferencesBrown Patrick, June 15th, 2006. The Carbon

Credit Myth, Island Tides, Vol 18,No.11

Tim Hargrave, Ned Helme, Suzi Kerr andTim Denne, “Defining Kyoto ProtocolNon-Compliance Procedures and

Mechanisms”, Center for Clean AirPolicy, October 1999

OECD (2000), Greener Public Purchasing:Issues and Practical Solutions, Paris.

Dasgupta, S., Laplante, B. and N. Mamingi(2001), Pollution and Capital Marketin Developing Countries, Journal ofEnvironmental Economics andManagement, Vol. 42, pp. 310-335

Zhang, Z.X. (2006), Cutting CarbonEmissions While Making Money: AWishful Thinking or A Win-WinOpportunity?, The Keynote Addressat the Plenary Session on MakingMoney from Saving Carbon at the 29thInternational Association for EnergyEconomics International Conference,Potsdam, Germany, June 8-10

Granger , C.W.J. ( 1969), “ Investigatingcausal relations by econometric methodsand cross spectral methods”,Econometricia , 34, 424-438

Phillips, P.C.B., Perron, P. (1988), “Testingfor a Unit Root in Time SeriesRegression”, Biometrica, 75, 335-46.q

Pairwise Granger Causality Tests Date: 02/16/09 Time: 14:46 Sample: 1 224 Lags: 2

Null Hypothesis: Obs F-Statistic Probability

SER02 does not Granger Cause SER01 220 23.6078 5.4E-10 SER01 does not Granger Cause SER02 2.39522 0.09358

Table V




Table VI




Table VII



SEBI

CIRCULAR / PRESS NOTE

Amendments to the Equity Listing Agreement

CIRCULAR NO.CFD/DIL/LA/2/2009/21/7, DATED 21-7-2009, ISSUED BY CORPORATION FINANCEDEPARTMENT, DIVISION OF ISSUES AND LISTING, SEBI

1. It has been decided to amend the Equity Listing Agreement to prohibit listed companies from issuing shares with superiorrights as to voting or dividend vis-à-vis the rights on equity shares that are already listed. Accordingly, this circular isissued, in exercise of powers conferred by sub-section (1) of Section 11 of the Securities and Exchange Board of India Act,1992, to protect the interest of investors in securities and to promote the development of, and to regulate the securitiesmarket.

2. The full text of the amendment is given at Annexure A.

3. All Stock exchanges are advised to:

(a) give effect to the above mentioned policy amendments and appropriately amend the relevant Clauses of the EquityListing Agreement in line with the text of the amendment specified in Annexure A.

(b) communicate to SEBI the status of implementation of the requirements of this circular in the next Monthly DevelopmentReport.

4. Applicability

The amendment as specified in Annexure A shall come into force with immediate effect.

5. This circular is available on SEBI website at www.sebi.gov.in under the categories "Legal Framework" and "Issues andListing".

Annexure A

1. After clause 28, the following clause shall be inserted, namely:-

"28A. The company agrees that it shall not issue shares in any manner which may confer on any person, superiorrights as to voting or dividend vis-à-vis the rights on equity shares that are already listed."

SEBI


Amendments to SEBI (Disclosure and Investor Protection) Guidelines, 2000

CIRCULAR NO.CFD/DIL/DIP/36/2009/09/07, DATED 9-7-2009, ISSUED BY CORPORATION FINANCEDEPARTMENT, DIVISION OF ISSUES AND LISTING, SEBI

LINK: http://www.sebi.gov.in/circulars/2009/cfdcir362009.pdf

SEBI


Revision in Filing Fees - Amendments to SEBI (Mutual Funds) Regulations, 1996

CIRCULAR NO. IMD/ CIR.NO.5/2009, DATED 8-7-2009, ISSUED BY INVESTMENT MANAGEMENT DEPARTMENT, SEBI

1. We are enclosing a copy of the gazette notification No. LAD-NRO/GN/2009-10/11/167759 on SEBI (Payment of Fees)(Amendment) Regulations, 2009 dated 29 June, 2009, inter alia, containing amendments to SEBI (Mutual Funds) Regulations1996 on the captioned subject for your information and implementation.

2. It is clarified that the revised filing fee would be applicable to those scheme(s) whose scheme information document(s)has been filed with SEBI on or after July 1, 2009.

3. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of IndiaAct, 1992, read with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996, to protect theinterests of investors in securities and to promote the development of, and to regulate the securities market.

Legal Updates


SEBI


Firm commitment requirement for registration as Foreign

Venture Capital Investors

CIRCULAR NO. IMD/DOF-1/FVCI/CIR.NO.1/2009, DATED 3-7-2009, ISSUED BY INVESTMENT MANAGEMENTDEPARTMENT, DIVISION OF FUNDS 1, SEBI

Link: http://www.sebi.gov.in/circulars/2009/fvci0109.pdf

SEBI


Mutual Funds- Empowering investors through transparency in

payment of commission and load structure

CIRCULAR NO. IMD/ CIR.NO.4/168230/09, DATED 30-6-2009, ISSUED BY INVESTMENT MANAGEMENTDEPARTMENT, SEBI

Link: http://www.sebi.gov.in/circulars/2009/imd_cir_3009.pdf

RBI


Deferred Payment Protocols dated April 30, 1981 and December 23, 1985

between Government of India and erstwhile USSR

A.P. (DIR SERIES) CIRCULAR NO.2, DATED 3-7-2009, ISSUED BY

FOREIGN EXCHANGE DEPARTMENT, RBI

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No.59 dated March24, 2009, wherein the rupee value of the special currency basket was indicated as Rs.67.2425 effective from March 05, 2009.

2. AD Category-I banks are advised that a further revision has taken place on May 19, 2009 and accordingly, the rupee valueof the special currency basket has been fixed at Rs.64.6153 with effect from May 22, 2009.

3. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned.

4. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign ExchangeManagement Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under anyother law.

RBI


RBI/2009-10/106

A.P. (DIR Series) Circular No. 05

July 22, 2009

ToAll Category - I Authorised Dealer banks

Madam / Sir,

Issue of Indian Depository Receipts (IDRs)

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Companies (Issue of Indian DepositoryReceipts) Rules, 2004 (IDR Rules) notified by the Ministry of Corporate Affairs and subsequent amendments made theretoand Circular No. SEBI / CFD / DIL / DIP / 20 /2006 / 3 / 4 dated April 3, 2006 issued by the Securities and Exchange Board ofIndia (SEBI) regarding issue of Indian Depository Receipts by foreign companies in India and the SEBI (Disclosure andInvestor Protection) Guidelines, 2000.

Legal Updates


2. In order to facilitate the eligible companies resident outside India to issue Indian Depository Receipts (IDRs) through aDomestic Depository and to permit persons resident in India and outside India to purchase, possess, transfer and redeemIDRs, it has been decided to operationalise the IDR Rules, notified by the Government of India, as amended from time totime, with immediate effect.

3. Accordingly, eligible companies resident outside India may issue Indian Depository Receipts (IDRs) through a DomesticDepository. The permission has been granted subject to compliance with the Companies (Issue of Depository Receipts)Rules, 2004 and subsequent amendments made thereto and the SEBI (DIP) Guidelines, 2000, as amended from time totime. In case of raising of funds through issuance of IDRs by financial/banking companies having presence in India,either through a branch or subsidiary, the approval of the sectoral regulator(s) should be obtained before the issuance ofIDRs.

Investment by Persons resident in India / FIIs / NRIs in IDRs4. The FEMA Regulations shall not be applicable to persons resident in India as defined under section 2(v) of FEMA, 1999,

for investing in IDRs and subsequent transfer arising out of transaction on a recognized Stock Exchange in India. ForeignInstitutional Investors (FIIs) including SEBI approved sub-accounts of the FIIs, registered with SEBI and Non-ResidentIndians (NRIs) may also invest, purchase, hold and transfer IDRs of eligible companies resident outside India and issuedin the Indian capital market, subject to the Foreign Exchange Management (Transfer or Issue of Security by a PersonResident Outside India) Regulations, 2000 notified vide Notification No. FEMA 20 / 2000-RB dated May 3, 2000, asamended from time to time. Further, NRIs are allowed to invest in the IDRs out of funds held in their NRE / FCNR(B)account, maintained with an Authorised Dealer / Authorised bank.

Fungibility5. Automatic fungibility of IDRs is not permitted.Period of redemption6. IDRs shall not be redeemable into underlying equity shares before the expiry of one year period from the date of issue of

the IDRs.Procedure for transfer and redemption of IDRs7. At the time of redemption / conversion of IDRs into underlying shares, the Indian holders (persons resident in India) of

IDRs shall comply with the provisions of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security)Regulations, 2004 notified vide Notification No. FEMA 120 / RB-2004 dated July 7 2004, as amended from time to time.Accordingly, the following guidelines shall be followed, on redemption of IDRs:i. Listed Indian companies may either sell or continue to hold the underlying shares subject to the terms and conditions

as per Regulations 6B and 7 of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time.ii. Indian Mutual Funds, registered with SEBI may either sell or continue to hold the underlying shares subject to the

terms and conditions as per Regulation 6C of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amendedfrom time to time.

iii. Other persons resident in India including resident individuals are allowed to hold the underlying shares only for thepurpose of sale within a period of 30 days from the date of conversion of the IDRs into underlying shares.

iv. The FEMA provisions shall not apply to the holding of the underlying shares, on redemption of IDRs by the FIIsincluding SEBI approved sub-accounts of the FIIs and NRIs.

Others8. The proceeds of the issue of IDRs shall be immediately repatriated outside India by the eligible companies issuing such

IDRs. The IDRs issued shall be denominated in Indian Rupees.9. AD Category -I banks may bring the contents of this circular to the notice of their constituents and customers.10. Necessary amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident

Outside India) Regulations, 2000 and Foreign Exchange Management (Transfer or Issue of Any Foreign Security)Regulations, 2004, are being issued separately.

11. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign ExchangeManagement Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any otherlaw.

Yours faithfully,(Salim Gangadharan)Chief General Manager-in-Charge

Legal Updates


INSURANCE MATTERS


Redressal of Public Grievances (Amendment) Rules, 2009 - Substitution of rule 9

NOTIFICATION NO. G.S.R. 510(E), DATED 7-7-2009, ISSUED BY DEPARTMENT OF FINANCIAL SERVICES,MINISTRY OF FINANCE

Whereas, the draft of certain rules further to amend the Redressal of Public Grievance Rules, 1998 were published in theGazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 2nd April, 2009 vide notification of the Governmentof India in the Ministry of Finance, Department of Financial Services (Insurance Division) Number 233(E), dated the 2ndApril, 2009 inviting objections and suggestions from all persons likely to be affected thereby within a period of forty-fivedays from the date on which copies of the Gazette of India, in which the said notification was published, were made availableto the public;

And, whereas, the copies of the said Gazette were made available to the public on the 9th April, 2009;

And, whereas, the objections and suggestions received from the public have been considered by the Central Government;

Now, therefore, in exercise of the powers conferred sub-section (1), section 114 of the Insurance Act, 1938 (4 of 1938) theCentral Government hereby makes the following rules further to amend the Redressal of Public Grievances Rules, 1998,namely:-

1. (1) These rules may be called the Redressal of Public Grievances (Amendment) Rules, 2009.

(2) They shall come into force on the date of their final publication in the Official Gazette.

2. In the Redressal of Public Grievances Rules, 1998, for rule 9, the following rule shall be substituted, namely:-

"9. Pay and Allowances of Ombudsman. - (1) The ombudsman shall be allowed a fixed pay of eighty thousand rupeesper month and any pension to which he is entitled from the Central Government or a State Government or any otherorganization or institution shall be deducted from his salary.

(2) The effective date for application of the revised pay and admissibility of other allowances and perquisites shall besuch as may be determined by the Central Government."

INSURANCE MATTERS


E-Payment by Life Insurance Companies

CIRCULAR NO.18/AML-CIR/IRDA/E-PAYMENTS/JUL-09, DATED 9-7-2009, ISSUED BY INSURANCEREGULATORY AND DEVELOPMENT AUTHORITY

LINK: http://www.irdaindia.org/lifecirculars/E-payment-CIR090709.pdf

INSURANCE MATTERS


INSURANCE REGULATORY & DEVELOPMENT AUTHORITY

July 3, 2009

IRDA/AGENTS/ORD/ 17 /JULY 2009

Re: Guidelines on Qualifications of Corporate Insurance Executives and Faculty of Agents' Training Institutes.The large scale recruitment of agents by insurers in last few years and phenomenal growth in sales through corporateagencies has necessitated large number of professionals in the fields of training and marketing. Firstly, the insurers haveexpanded their training facilities to accommodate new agent recruits and are making efforts to recruit the faculty required.Secondly, the corporate agents of insurers required large number of persons who are qualified to be specified persons orcorporate insurance executives. In the above context several insurers represented to IRDA to suitably modify the trainingrequirements for the faculty of Agents' Training Institutions, Corporate Insurance Executives, Specified Persons etc.

As per IRDA Guidelines on Licensing of Corporate Agents, the minimum qualification of Chief Insurance Executive (CIE) isFIII / AIII or such other qualification or experience that IRDA, may at its sole discretion, consider adequate. As of now onlythese two qualifications are being considered.

Legal Updates


To identify the qualifications which are suitable for the above positions in insurance company and evaluate their equivalenceto presently specified qualifications, Chairman, IRDA constituted the standing panel with the following members:

1. Executive Director (Administration), IRDA, Hyderabad (Chairman & Convenor)

2. Managing Director, IIRM, Hyderabad

3. Secretary General, Life Insurance Council, Mumbai

4. Secretary General, General Insurance Council, Mumbai

5. Secretary General, Insurance Institute of India, Mumbai

The Standing Panel considered various issues connected with the qualifications and made recommendations which aresubmitted to the Authority.

After considering the recommendations of the Standing Panel, Authority accepted the following recommendations andordered that this be incorporated in Circulars concerned:

1. The qualifications required for Corporate Insurance Executive (CIE) , Specified Person, Faculty of ATI shall include thefollowing qualifications:

a. An Associate/Fellow of the Insurance Institute of India, Mumbai.

b. an Associate/Fellow of the Institute of Chartered Accountants of India, New Delhi; with diploma in Insurance and RiskManagement.

c. an Associate/Fellow of the Institute of Costs and Works Accountants of India, Calcutta;

d. an Associate/Fellow of the Institute of Company Secretaries of India, New Delhi;

e. an Associate/Fellow of the Actuarial Society of India, Mumbai;

f. possessing Certified Associate ship of Indian Institute of Bankers (CAIIB)

g. MBA (Two year) Course / PG Diploma (One year) course in Insurance from Amity School of Insurance & ActuarialScience, Noida

h. PG Diploma (One year) course in Insurance from Institute of Insurance and Risk Management, Hyderabad

i. MBA (Two year) course in Insurance from National Insurance Academy, Pune

j. PGMBA (Two Year) course in Insurance from National Law University, Jodhpur

k. PGMBA (Two year) course in Insurance from MET, Mumbai

l. MBA (Two year) course in Insurance from Birla Institute of Management Technology, Noida

2. The persons with above qualifications (except at (a)) shall undergo a "Workshop for Insurance executives" at NationalInsurance Academy, Pune or Insurance Institute of India, Mumbai or Institute of Insurance and Risk Management, Hyderabadas prescribed by the Authority.

3. Faculty of Agents Training Institute:

With regard to the qualification of faculty of Agents' Training Institutes, point no. 6 of STANDARD INSTRUCTIONS ANDGUIDELINES issued on October 4, 2004 is modified as below:

"Every Institute should have at least one qualified permanent faculty who is an Associate or Fellow from the InsuranceInstitute of India for each stream i.e. for Life and Non-Life. However, the training institutes can employ faculty with more than15 years of service in the insurance company with last three years in managerial capacity i.e. Scale III Officer and above in thepublic sector insurance companies".

The above guidelines come into force with immediate effect.

( A Giridhar)

Executive Director

Legal Updates


Programme on

MANAGEMENT OFTAXATION-SERVICE TAX,

VAT, EXCISE, CUSTOMS & TDS16-18 September, 2009

atBANGALORE

THE INSTITUTE OF COST & WORKS ACCOUNTANTS OF INDIA( Set up under an Act of Parliament in the year 1944) – founder member of IFAC, CAPA and SAFA

MANAGEMENT OF TAXATION - SERVICE TAX,VAT, EXCISE, CUSTOMS &TDS

COURSE COVERAGEv An Overview of Service Tax

v Export & Import of Services

v Valuation of Taxable Services

v Service Tax Credit - Eligibility, Availment Procedures and Problem Areas

v CENVAT Credit

v VAT - General Issues & Problems & GST

v Issues in TDS and Impact on Direct Taxation

v Issues & Problems in Excise & Customs

Senior and Middle level Executives of Public and Private Sector Undertakings, Government Departments, Autonomousbodies, Banks, Financial Institutions, Insurance Companies and Multinationals will find the programme rewarding.

METHODOLOGY

The programme will be developed through lectures, discussions and case studies using audio-visual equipments.

FACULTY

The Sessions will be handled by Eminent and Expert Faculty Members in the field of Finance.

VENUE

Hotel The Park

14/7 Mahatma Gandhi Road, Bangalore-560042Phone:080-25594666

DATES

16-18 September, 2009, (10.00-17.00 Hrs.)

PARTICIPATION FEE

Rs. 12,000/- (Rupees Twelve thousand only) per participant. The programme is Non Residential.

Fee includes course fee, course material, Lunch & Tea/coffee during the programme

Programme


ABOUT THE INSTITUTE

The Institute of Cost & Works Accountants of India was established by the Government of India as an autonomousprofessional Institute in 1959 to provide training, education and research facilities in cost and management accounting. TheInstitute is a member of the International Federation of Accountants (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).

THE OBJECTIVES

v To promote the knowledge of Cost and Management accountancy, to provide educational facilities for training of youngmen and women for building careers in management accounting.

v To improve the decision making skills and administrative competence relevant to management accounting and corporatemanagement in general.

v To create knowledge through research both applied and conceptual relevant to management on cost accounting and itsundenying disciplines so as to disseminate such knowledge through publications.

THE TRAINING PROGRAMMES

v The Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challengesof the corporate world.

Broadly the programs are classified as :

v Training programs for practicing managers of both public and private sectors. Banks, Financial Institutions,Insurance Companies, Multinationals and Government Departments.

v Programmes for its own professional members, and

v Tailor-made in house training programs for Industry, Govt. Departments and Public Services. It also offers specificprograms for Defence, Railways, Telecom and Public Utility Services.

PresidentShri G. N. VENKATARAMAN

Vice PresidentShri B. M. SHARMA

Chairman, Continuing Education Programme CommitteeShri A. G. DALWADI

The Cheque/DD to be sent along with nominations in favour of The Institute of Cost and Works Accountants of India’payable at New Delhi.

Details for ECS Payment: State Bank of India, Lodhi Road Branch, New Delhi - 110 003

Current A/c No.: 30678404793 MICR Code : 110002493 IFSCCode: SBIN0060321.

For Kind Information:

For outstation programmes the participants are requested to get the confirmation from the Institute before proceeding to thevenue. The Institute will not be held responsible if any participant reaches the venue for the postponed/cancelled programmewithout getting the confirmation from the Institute. The cancellation/ postponement of the programme, if any, will beintimated to only those organizations whose nominations have been received by the Institute on time.

REGISTRATION

For further details and Registration please contact:Sh. D. Chandru Addl. Director (PD&P)

The Institute of Cost and Works Accountants of IndiaICWAI Bhawan, 3 Institutional Area,

Lodi Road, New Delhi - 110 003, Phones: 011-24622156, 24618645, (D) 24643273 (M) 9818601200Tele-Fax : 011-43583642 / 24622156 / 24618645

E-mail : [email protected], [email protected] : www.icwai.org

Programme


THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA(Set up under an Act of Parliament in the year 1944) – founder member of IFAC, CAPA and SAFA

Intensive Programmeon

FINANCE FOR JR. FINANCE AND ACCOUNTSOFFICERS AND NON-EXECUTIVES (F&A)

06-09 OCTOBER, 2009at

GOACOURSE COVERAGE

Ø Budgeting and Budgetary ControlØ Capital BudgetingØ Financial Aspects of Contract ManagementØ Compliance under Companies ActØ Compliance under Income Tax LawØ Auditing - Internal Audit, Statutory Audit and Government AuditØ Understanding and Analysis of Financial StatementsØ Accounting StandardsØ International Financial Reporting Standards (IFRS)

PROGRAMME ONFINANCE FOR JUNIOR FINANCE AND ACCOUNTS

OFFICERS AND NON-EXECUTIVES (F&A)Dear Sir/ Madam,We are happy to inform you that we are organizing an intensive residential programme on ‘Finance for Junior Financeand Accounts Officers and Non-Executives (F&A)’during 06- 09 October, 2009 at Goa.We request you to kindly nominate the finance executives/ non executives (F&A) for this programme which will be ofimmense use and benefit to the participants and organizations on this subject.With regards,

A.G. DalwadiChairman,

CEP Committee, ICWAIFOR WHOMJunior Finance Executives, Accounts Officers and Non-Executives (F&A) of Public and Private Sector Undertakings,Government Departments, Autonomous Bodies, Banks, Financial Institutions, Insurance Companies and Multinationals willfind the programme rewarding.METHODOLOGYThe programme will be developed through lectures, discussions and case studies using audio-visual equipments.FACULTYEminent experts and professionals will be dealing with the subjects.VENUEHotel Bogmalo Beach Resort Bogmalo Beach, GOA Phone: 0832-2538222-25DATES06-09 October, 2009(Check-in Time -12.00 Mrs. on 61h October, 2009)(Check-out Time -12.00 Hrs. on 91h October, 2009)PARTICIPATION FEEThe Programme is Residential.Rs.28.000/- (Rupees Twenty Eight Thousand) per Participant. (The charges for accompanying Spouse would be Rs.4,000/-

Programme


ABOUT THE INSTITUTE

The Institute of Cost & Works Accountants of India was established by the Government of India as an autonomousprofessional Institute in 1959 to provide training, education and research facilities in cost and management accounting.TheInstitute is a member of the International Federation of Accountants (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).

THE OBJECTIVES

« To promote the knowledge of Cost and Management accountancy, to provide educational facilities for training of youngmen and women for building careers in management accounting.

« To improve the decision making skills and administrative competence relevant to management accounting and corporatemanagement in general.

« To create knowledge through research both applied and conceptual relevant to management on cost accounting and itsunderlying disciplines so as to disseminate such knowledge through publications.


The Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challenges ofthe corporate world.


t Training programs for practicing managers of both public and private sectors, Banks, Financial Institutions, InsuranceCompanies, Multinationals and Government Departments.

t Programmes for its own professional members, and

t Tailor-made in house training programs for Industry, Govt. Departments and Public Services. It also offers specificprograms for Defence, Railways, Telecom and Public Utility Services.




towards accommodation and all meals for all the three days). Fee includes Course Fee, Course Material, Accommodation, allMeals and Visits.The Cheque/ DO to be drawn in favour of ‘The Institute of Cost and Works Accountants of India’ payable at New Delhi.Details for ECS Payment:State Bank of India, Lodhi Road Branch, New Delhi -110 003 Current A/c No.: 30678404793 MICR Code : 110002493 IFSCCode : SBIN0060321For Kind Information :For outstation programmes the participants are requested to get the confirmation from the Institute before proceeding tothe venue. The Institute will not be held responsible if any participant reaches the venue for the postponed/cancelledprogramme without getting the confirmation from the Institute. The cancellation/ postponement of the programme, if any,will be intimated to only those organizations whose nominations have been received by the Institute on time.REGISTRATIONFor further details and Registration please contact:Shri D. Chandru, Add). Director (PD&P)The Institute of Cost and Works Accountants of IndiaProfessional Development and Programme DirectorateICWAI Bhawan, 3 Institutional Area,Lodi Road, New Delhi -110 003Phones :011-24622156-57-58,24618645, (D) 24643273 (M) 9818601200Tele-Fax : 011-43583642 / 24622156 / 24618645 E-Mail : [email protected], [email protected] : www.icwai.org

Programme




SERVICE TAX, VAT AND TDS06-09 OCTOBER, 2009

atGOA

COURSE COVERAGEt Service Tax Levy: Background, Evolution and Current State of the Lawt Export & Import of Servicest Valuation of Taxable Servicest Service Tax Credit - Eligibility, Availment Procedures and Problem Areast Availing of Tax Creditt Adjustment to Output Tax to Input Tax Creditt Returns, Assessments and Refundt Progress towards Proposed Implementation of GSTt TDS - Aspects of TDS relating to Income from Salaries (Sec. 192), Rent (194-1), Contractors and Sub-contractors

(194-C). Payments relating to Professionals (194-J) and Foreign Remittances (195)t VAT - General Issues & Problemst Issues in Service Tax, VAT & TDS

PROGRAMME ON‘SERVICE TAX, VAT AND TDS’

Dear Sir/ Madam,We are happy to inform you that we are organizing an intensive residential programme on ‘Service Tax, VAT and TDS’during 06-09 October, 2009 at Goa.We request you to kindly participate/nomina te your executives for this programme which will be of immense use andbenefit to the participants and organization.With regards,


CEP Committee, ICWAIFOR WHOMSenior and Middle level Executives from Public and Private Sector Enterprises, Banks, Financial Institutions, InsuranceCompanies, Multinational Companies and Government Departments will find the programme rewarding.METHODOLOGYThe programme will be developed through lectures, discussions and case studies using audio-visual equipments.FACULTYEminent experts and professionals in the field of Service Tax & Direct Taxation will be dealing with the subjects.VENUEHotel Bogmalo Beach ResortBogmato Beach, GOA, Phone: 0832-2538222-25DATES06-09 October, 2009(Check-in Time -12.00 Hrs. on 6th October, 2009)

Programme


(Check-out Time -12.00 Hrs. on 9th October, 2009)PARTICIPATION FEEThe Programme is Residential.Rs. 28,0007- (Rupees Twenty Eight Thousand) per Participant. (The charges for accompanying Spouse would be Rs. 4,0007-towards accommodation and all meals for all the three days). Fee includes Course Fee, Course Material, Accommodation, allMeals and Visits.The Cheque/ DD to be drawn in favour of “The Institute of Cost and Works Accountants of India’ payable at New Delhi.Details for ECS Payment:State Bank of India, Lodhi Road Branch, New Delhi -110 003Current A/c No.: 30678404793MICR Code : 110002493 IFSC Code : SBIN0060321For Kind Information :For outstation programmes the participants are requested to get the confirmation from the Institute before proceeding tothe venue. The Institute will not be held responsible if any participant reaches the venue for the postponed/cancelledprogramme without getting the confirmation from the Institute. The cancellation/ postponement of the programme, if any,will be intimated to only those organizations whose nominations have been received by the Institute on time.REGISTRATIONFor further details and Registration please contact:Shri D. Chandru, Addl). Director (PD&P)The Institute of Cost and Works Accountants of IndiaProfessional Development and Programme DirectorateICWAI Bhawan, 3 Institutional Area,Lodi Road, New Delhi -110 003Phones :011-24622156-57-58,24618645, (D) 24643273 (M) 9818601200Tele-Fax : 011-43583642 / 24622156 / 24618645 E-Mail : [email protected], [email protected] : www.icwai.org

ABOUT THE INSTITUTEThe Institute of Cost & Works Accountants of India was established by the Government of India as an autonomousprofessional Institute in 1959 to provide training, education and research facilities in cost and management accounting.TheInstitute is a member of the International Federation of Accountants (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).THE OBJECTIVES« To promote the knowledge of Cost and Management accountancy, to provide educational facilities for training of young

men and women for building careers in management accounting.« To improve the decision making skills and administrative competence relevant to management accounting and corporate

management in general.« To create knowledge through research both applied and conceptual relevant to management on cost accounting and its

underlying disciplines so as to disseminate such knowledge through publications.THE TRAINING PROGRAMMESThe Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challengesof the corporate worldBroadly the programs are classified as :t Training programs for practicing managers of both public and private sectors, Banks, Financial Institutions, Insurance

Companies, Multinationals and Government Departments.t Programmes for its own professional members, andt Tailor-made in house training programs for Industry, Govt. Departments and Public Services. It also offers specific

programs for Defence, Railways, Telecom and Public Utility Services.




Programme


Ø Mergers & Acquisition : The Middle East ExperienceØ Dubai Financial Markets

Ø Derivative Market in Dubai : Dubai Gold & Commodity ExchangeØ Real Estate Market in Dubai : Current Scenario & Future ProspectsØ Understanding Islamic Finance

Ø Experience of Indian Banks in Dubai

Dear Sir/ Madam,We are happy to inform you that we are organizing an International programme on ‘Strategic Financial Management’during 08-12 October, 2009 at Dubai.We request you to kindly nominate your executives for this programme which will be of immense use and benefit to theparticipants and organization on this subject.With regards,


CEP Committee, ICWAIMETHODOLOGYThe programme will be developed through lectures, discussions and case studies using audio-visual equipments.FOR WHOMSenior and Middle level Executives of Public and Private Sector Undertakings Multinationals, Autonomous Bodies, Banks,Insurance Companies, Financial Institutions and Government Departments will find the programme rewarding.FACULTYThe programme sessions will be handled by the eminent & expert faculty members in the field of Financial Risk Management.VENUEHotel Dhow PalaceBur Dubai, Near Burjuman Shopping MallDubai, UAE, Phone : 971-4-3599992, Fax : 971-4-3599292DATES08-12 October, 2009PARTICIPATION FEEThe programme is Residential.Rs. 1,30,0007- (Rupees one lakh thirty thousand only) per participant on single room basis.Fee Includes : Course fee, course kit including course material, accommodation, all meals, economy class airfare for travelingtogether including all airport taxes, visa fee, airport transfers, medical insurance and visits.Fee Excludes : Local conveyance, incidentals and personal expenses.The Cheque/ DD to be sent along with nominations in favour of The Institute of Cost and Works Accountants of India’payable at New Delhi.Please Notev The passport of the participants should be valid for a minimum period of six months from the date of travelling.v There should not be any additional pages attached with the passport as no Embassy gives Visa on the additional pages.v The passport should bear an ‘ECNR’ stamp or the ‘Emigration Check Required’ stamp should be suspended.v Programme participation is limited to 15 executives on first-come-first-served basis as lot of requests have already been

made.v Request for registration along with fees will be refunded if we are unable to accommodate. However once registration is

accepted by our office, no refund will be made, but change of participation is possible with sufficient time.

Programme


International Residential Seminaron

STRATEGIC FINANCIAL MANAGEMENT08-12 OCTOBER, 2009

atDUBAI

COURSE COVERAGEØ Understanding IFRSØ Financial Risk Management

Ø Understanding Business Environment of UAE & the Middle EastØ Financial Performance of Top UAE CompaniesØ Doing Business in Dubai (Opening Branches by Foreign Companies)

Ø Tax Environment in the GCC


v LAST DATE FOR REGISTRATION ALONG WITH FEE & VALID PASSPORT:25th SEPTEMBER, 2009

REGISTRATIONFor further details and Registration please contact:Shri D. Chandru, Addl. Director (PD&P)The Institute of Cost and Works Accountants of IndiaProfessional Development and Programme DirectorateICWAI Bhawan, 3 Institutional Area,Lodi Road, New Delhi - 110 003Phones : 011-24622156-57-58, 24618645 (D) 24643273 (M) 9818601200Tele-Fax : 011-43583642 / 24622156 / 24618645E-Mail : [email protected],[email protected] : www.icwai.org

LIST OF ORGANISATIONS BENEFITED FROM THE EARLIERINTERNATIONAL PROGRAMMES OF THE INSTITUTE

l Airports Authority of Indial Bharat Sanchar Nigam Ltd.l Central Warehousing Corporationl Chennai Petroleum Corporation Ltd.l Coal India Ltd.l Delhi Development Authorityl HSCC (I) Ltd.l HUDCOl ICRA Ltd.l IFFCO-Tokio General Insurance Co. Ltd.l Indian Farmers Fertilizers Coop. Ltd.l Indian Oil Corporation Ltd.l Inland Waterways Authority of Indial KRIBHCO Ltd.l LIC Housing Finance Ltd.l Life Insurance Corporation of India Ltd.l Mahanagar Telephone Nigam Ltd.l Ministry of Chemicals & Fertilizers, Govt, of Indial Ministry of Commerce & Textiles, Govt. of India

l Ministry of Rural Development, Govt. of Indial MMTC Limitedl National Institute of Urban Affairsl Nepal Electricity Authority, Nepall Neyveli Lignite Corporation Ltd.l NHPC Limitedl NMDC Limitedl Numaligarh Refinery Ltd.l Oil and Natural Gas Corpn. Ltd.l Oil India Limitedl Oriental Insurance Company Ltd.l Orissa Hydro Power Corporation Limitedl Petronet LNG Limitedl Power Finance Corporation Limitedl Syndicate Bankl Tamil Nadu Newsprint and Papers Ltd.l The Andhra Pradesh Paper Mills Limitedl United India Insurance Co. Ltd.l Zuari Industries Ltd.

Programme

ABOUT THE INSTITUTEThe Institute of Cost & Works Accountants of India was established by the Government of India as an autonomousprofessional Institute in 1959 to provide training, education and research facilities in cost and management accounting. TheInstitute is a member of the International Federation of Accountants (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).THE TRAINING PROGRAMMESThe Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challenges ofthe corporate world.Broadly the programmes are classified as :l Training programmes for practicing managers of both Public and Private Sectors, Banks, Financial Institutions, Insurance

Companies and Government Departments.l Programmes for its own Professional Members, andl Tailor-made in-house training programmes for Industry, Government Departments and Public Services. It also offers

specific programmes for Defence, Railways, Telecom and Public Utility Services.





DEPARTMENT OF PUBLIC ENTERPRISES GOVERNMENT OF INDIA


Jointly OrganisingIntensive Programme on

COST CONTROL AND COST EFFECTIVENESS21-23 OCTOBER, 2009

atHYDERABAD

COURSE COVERAGE

Ø Linking Cost Control and Cost Effectiveness to Business StrategyØ Understanding Internal Cost StructureØ Sensitivity AnalysisØ Cost Control and Cost Effectiveness Issues in – Value Engineering and Quality Management – Performance Evaluation – Technology OptimizationØ Strategic Cost ManagementØ Pricing and Product Mix DecisionsØ Target Costing for Cost CompetitivenessØ Effective Long Term Cost Reduction: A Strategic PerspectiveØ Optimizing Financing Cost - Long Term and Short Term

and

Programme

PROGRAMME ONCOST CONTROL AND COST EFFECTIVENESS

OBJECTIVESThe Public and Private Sector Enterprises in India have proved time and again about their professional approach to managingthe business, by emerging as the front runners in various industry segments. The additbn to the growing band of Navratnasevery year, re-emphasise this aspect. Many are waiting in the anvil to prove their efficiency, if they are provided a levelplaying field.The urge to emerge profitable has to be inculcated through the entire spectrum of management specially among the seniorand middle level executives. The support process involves imparting training in proven cost management techniques andskills.The present programme aims at highlighting the areas for incorporating cost-effectiveness and improving overall costefficiencies towards better resource mobilization and its management for the Corporate Sector.FOR WHOMSenior and Middle level Executives from Public and Private Sector Enterprises, Banks, Financial Institutions, InsuranceCompanies, Multinational Companies and Government Departments will find the programme rewarding.METHODOLOGYThe programme will be developed through lectures, discussions and case studies using audio-visual equipments.FACULTYEminent Experts in the field of Cost Management will be dealing with the subjects.VENUEHotel Taj Deccan, Road No. 1, Banjara Hills, Hyderabad - 500 034, Phone : 040-66663939DATES21-23 October, 2009 (10.00 - 17.00 Hrs.)


Programme

PARTICIPATION FEEThe programme is Non-Residential.Rs. 12.000/- (Rupees Twelve thousand only) per participant. Fee includes course fee, course material, lunch, tea /coffeeduring the programme.The Cheque/ DD to be drawn in favour of The Institute of Cost and Works Accountants of India’ payable at New Delhi.Details for ECS Payment : State Bank of India, Lodhi Road Branch, New Delhi -110 003 Current A/c No.: 30678404793 MICRCode : 110002493 IFSC Code : SBIN0060321For Kind Information : For outstation programmes the participants are requested to get the confirmation from the Institutebefore proceeding to the venue. The Institute will not be held responsible if any participant reaches the venue for thepostponed/ cancelled programme without getting the confirmation from the Institute. The cancellation/postponement ofthe programme, if any, will be intimated to only those organizations whose nominations have been received by theInstitute on time.REGISTRATIONFor further details and Registration please contact:Shri D. Chandru, Addl. Director (PD&P)The Institute of Cost and Works Accountants of IndiaProfessional Development and Programme DirectorateICWAI Bhawan, 3 Institutional Area,Lodi Road, New Delhi - 110 003Phones : 011-24622156-57-58, 24618645(0) 24643273 (M) 9818601200Tele-Fax: 011-43583642 / 24622156 / 24618645E-Mail : [email protected], [email protected]: www.icwai.orgABOUT THE INSTITUTEThe Institute of Cost & Works Accountants of India was established by the Government of India as an autonomousprofessional Institute in 1959 to provide training, education and research facilities in cost and management accounting. TheInstitute is a member of the International Federation of Accountants (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).THE OBJECTIVES« To promote the knowledge of Cost and Management accountancy, to provide educational facilities for training of young

men and women for building careers in management accounting.« To improve the decision making skills and administrative competence relevant to management accounting and corporate

management in general.« To create knowledge through research both applied and conceptual relevant to management on cost accounting and its

underlying disciplines so as to disseminate such knowledge through publications.THE TRAINING PROGRAMMESThe Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challenges ofthe corporate worldBroadly the programs are classified as :t Training programs for practicing managers of both public and private sectors, Banks, Financial Institutions, Insurance

Companies, Multinationals and Government Departments.t Programmes for its own professional members, andt Tailor-made in house training programs for Industry, Govt. Departments and Public Services. It also offers specific

programs for Defence, Railways, Telecom and Public Utility Services.President

Shri G. N. VENKATARAMANVice President

Shri B. M. SHARMAChairman, Continuing Education Programme Committee

Shri A. G. DALWADI


Ø Indian Accounting Standards and International Financial Reporting Standards (IFRS)Ø First Time Adoption of IFRSØ Preparation of Financial Statements under IFRSØ Select Standards in IFRS

Programme

PROGRAMME ONGlobal Convergence of Accounting Standards and

International Financial Reporting Standards (IFRS)Dear Sir/ Madam,We are happy to inform you that we are organizing an intensive residential programme on ‘Global Convergence ofAccounting Standards and International Financial Reporting Standards (IFRS)’ during 27-30 October, 2009 at Kochi(Cochin).We request you to kindly participate/ depute your executives for this programme which will be of immense use and benefitto your executives and organization on this subject.With regards,


CEP Committee, ICWAIFOR WHOMSenior and Middle level Executives from Public and Private Sector Enterprises, Banks, Financial Institutions, InsuranceCompanies, Multinational Companies and Government Departments will find the programme rewarding.METHODOLOGYThe programme will be developed through lectures, discussions and case studies using audio-visual equipments.FACULTYEminent experts and professionals will be dealing wrth the subjects.VENUEHotel Gokulam ParkKatoorKochi - 682 017Phone: 0484-2400707

DATES27-30 October, 2009(Check-in Time -12.00 Mrs. on 27th October, 2009)(Check-out Time -12.00 Mrs. on 30th October, 2009)

PARTICIPATION FEEThe Programme is Residential.

Rs. 26,000/- (Rupees Twenty Six Thousand) per Participant. (The charges for accompanying Spouse would be Rs. 2,500/-towards accommodation and all meals for all the three days). Fee includes Course Fee, Course Material, Accommodation, allMeals and Visits.



Global Convergence of Accounting Standards andInternational Financial Reporting Standards (IFRS)

27-30 OCTOBER, 2009at

KOCHI (COCHIN)

COURSE COVERAGE


Programme

The Cheque/ DD to be drawn in favour of ‘The Institute of Cost and Works Accountants of India’ payable at New Delhi.Details for ECS Payment:State Bank of India, Lodhi Road Branch, New Delhi -110 003 Current A/c No.: 30678404793

MICR Code : 110002493 IFSC Code : SBIN0060321

For Kind Information :

For outstation programmes the participants are requested to get the confirmation from the Institute before proceeding tothe venue. The Institute will not be held responsible if any participant reaches the venue for the postponed/cancelledprogramme without getting the confirmation from the Institute. The cancellation/postponement of the programme, if any,will be intimated to only those organizations whose nominations have been received by the Institute on time.

REGISTRATIONFor further details and Registration please contact:

Shri D. Chandru, Addl. Director (PD&P)The Institute of Cost and Works Accountants of IndiaProfessional Development and Programme DirectorateICWAI Bhawan, 3 Institutional Area,Lodi Road, New Delhi -110 003Phones : 011-24622156-27-28, 24618645

(D) 24643273 (M) 9818601200Tele-Fax : 011-43583642 7 24622156 7 24618645E-Mail : [email protected], [email protected] : www.icwai.org

ABOUT THE INSTITUTE

The Institute of Cost & Works Accountants of India was established by the Government of India as an autonomousprofessional Institute in 1959 to provide training, education and research facilities in cost and management accounting.TheI nstitute is a member of the International Federation of Accountants (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).

THE OBJECTIVES

« To promote the knowledge of Cost and Management accountancy, to provide educational facilities for training of youngmen and women for building careers in management accounting.

« To improve the decision making skills and administrative competence relevant to management accounting and corporatemanagement in general.

« To create knowledge through research both applied and conceptual relevant to management on cost accounting and itsunderlying disciplines so as to disseminate such knowledge through publications.


The Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challenges ofthe corporate world.


t Training programs for practicing managers of both public and private sectors, Banks, Financial Institutions, InsuranceCompanies, Multinationals and Government Departments.

t Programmes for its own professional members, and

t Tailor-made in house training programs for Industry, Govt. Departments and Public Services. It also offers specificprograms for Defence, Railways, Telecom and Public Utility Services.

President

Shri G. N. VENKATARAMAN

Vice President

Shri B. M. SHARMA

Chairman, Continuing Education Programme Committee

Shri A. G. DALWADI



ORGANISINGMANAGEMENT DEVELOPMENT PROGRAMME

ONEXCISE, SERVICE TAX, VAT & GST

SPECIAL EMPHASIS FOR PROBLEMS ENCOUNTERED BY INDUSTRIES & COMMERCE22-23 September 2009

10 am- 5 pm (both the days) at R&T Centre of ICWAI84 Harish Mukherjee Road, Kolkata-700 025

COURSE COVERAGE

SESSION-1

q CHANGES IN BUDGET 2009 AND THEREAFTER THROUGH FINANCE ACT-2009q ANALYSIS OF ISSUES ARISING THROUGH BUDGET 2009

SESSION-2

LTU (LARGE TAX PAYER UNIT)q CRITICAL ISSUES UNDER LARGE TAX PAYER UNITq SCOPE, BENEFITS & IMPLICATION

SESSION-3

GOODS AND SERVICE TAX(GST)q INTEGRATION OF STATE AND CENTRAL TAX-ROAD MAPq SCOPE & HURDLESq WAY FORWARD

SESSION-4

VALUE ADDED TAX(VAT)

q PROBLEMS FACED BY TRADE & INDUSTRIES AND ITS SOLUTIONSq ASSESSMENT PROCEDURESq INPUT TAX CREDIT-DISPUTES AND SOLUTIONS

SESSION-5

CENVAT

q RESTRICTIONS AND RELAXATION ON CENVAT FOR MANUFACTURERS AND SERVICE PROVIDERSq UTILISATION OF CAPITAL CENVAT-CRITICAL FACTORSq AVAILMENT AND UTILISATION OF CENVAT OF COMMON INPUTS AND SERVICES ON EXEMPTED AND

UNEXEMPTED GOODS AND SERVICES

SESSION-6

EXCISE AUDIT-2000(EA-2000)

q ITS COVERAGE AND SCOPE

q FREQUENCY AND COMPLIANCE

SESSION-7

RESPONSIBILITY OF SERVICE RECEIVER ON BEHALF OF SERVICE PROVIDER

q HOW MANY SERVICES AS PER SERVICE TAX RULES

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q DEFINITION OF FOREIGN SERVICE PROVIDERq COMPLIANCE BY SERVICE RECEIVER AND ITS SCOPE

SESSION-8RECENT CASE LAWSq ANALYSIS AND IMPLICATIONq QUESTION & ANSWER

Dear Sir/ Madam,We take immense pleasure to inform you that The Continuing Education Programme Committee (CEP) of The ICWAI isorganising a two day professional programme on EXCISE, SERVICE TAX, VAT & GST, SPECIAL EMPHASIS FOR PROBLEMSENCOUNTERED BY INDUSTRIES & COMMERCE on 22-23 September 2009 at R&T Centre, 84 Harish MukherjeeRoad,Kolkata-700 025. Participation in the programme will lead to a very rewarding experience.EXCISE, SERVICE TAX, VAT & GST are crucial topics of Business Finance. These will be discussed threadbare in theprogramme by eminent professionals in the respective fields with open house sessions.We request you to kindly participate in the programme/ nominate your executives to take full advantage of the unique andspecial knowledge-bank that your representative will acquire and effectively utilize to the benefit of his/her organization.With kind regards,Chairman.CEP Committee, ICWAIFor WhomSenior and Middle Level Executives of Private and Public Sector Undertakings, Multinationals, Autonomous Bodies, Banks,Insurance Companies, Financial Institutions and Government departments.MethodologyThe programme will be developed through lectures, discussion and case studies with audio-visual presentation.FacultyEminent Experts in the field will be dealing with the subjects.VenueR&T Centre of ICWAI, 84 Harish Mukherjee Road, Kolkata-700 025.Dates22-23 September 2009, (10.00-17.00 Mrs)Participation FeesRs.2000.00 (Rupees Two thousand only) per participant, Rs.1500.00 (Rupees one thousand five hundred only) for practicingMembers, The programme is Non-ResidentialFees includes course fees, course material, lunch and tea/coffee, during the programme.The Cheque /DD to be sent along with nominations in favour of (ICWAI)The Institute of Cost and Works Accountants ofIndia’, payable at KolkataFor Kind InformationFor outstation programmes the participants are requested to get the confirmation from the Institute before proceeding to thevenue. The Institute will not be held responsible if any participant reaches the venue for the postponed/cancelled programmewithout getting the confirmation from the Institute. The cancellation/ postponement of the programme, if any, will beintimated to only those organizations/ Individuals whose registration has already been made.REGISTRATION FORMDear Sir,We hereby inform you that the following executives of our organization are being deputed as delegates for the SeminaronEXCISE, SERVICE TAX, VAT & GST scheduled to be held at R&T Center of ICWAI, 84, Harish mukherjee Road, Kolkata-700025 on 22- 23 September 2009.

SI. No Name Designation Contact No E-mail

1

2

3

4

NB: Additional sheet/s may be used in case of more participants / delegates

Programme


We enclose our cheque/DD no......................dated.....................drawn in favour of ICWAI, payable at Kolkata towards theirdelegation fee.

Yours faithfully, (Name, Designation & Address)

Phone:

Place: Fax:

Date: e-mail:

REGISTRATIONFor further details and Registration please contact:Shri D.ChandruAdditional Director (CEP)The Institute of Cost and Works Accountants of IndiaProfessional Development and programme DirectorateICWAI Bhawan (2nd Floor)3, Institutional AreaLodi Road, New Delhi-110003Ph. : (011)2462 2156,24618645(0)

(011)2464 3273, 09818601200(M)Fax : (011)2462 2156,2461 8645Email : [email protected]

Shri Swapan Kumar Mazumder

Assistant Director

Professional Development &

Programmes Directorate

ICWAI-Kolkata

Phone (0) (033)22521031/1034/1035,

(033)22521602/1492

Mobile: 9831043067

Fax: 91-33-22521602/1492

E-mail: [email protected]

ABOUT THE INSTITUTE

The Institute of Cost & Works Accountants of India was established by an Act of the parliament as an autonomousprofessional institute in 1959 to provide training, education and research facilities in cost and management accounting. Theinstitute is a member of the International Federation of Accounts (IFAC), the Confederation of Asian & Pacific Accountants(CAPA) and the South Asian Federation of Accountants (SAFA).

THE OBJECTIVES

To promote and regulate the profession of Cost and Management accountancy, to provide

educational facilities for training of young men and women for building careers in management

accounting.

To improve the decision making skills and administrative competence relevant to management

accounting and corporate management in general. To create knowledge resources through research

both applied and fundamental relevant to cost & management accounting & management and its

allied disciplines.

THE TRAINING PROGRAMME

The Institute’s efforts are directed towards quality training and introducing new programmes to meet emerging challenges ofthe corporate world. Broadly the programmes are classified as under

l Training programmes for practicing managers/executives of both public and private sectors, Banks, Financial Institutions,Insurance Companies, Multinationals and Government Departments.

l Programmes for its own professional members, and

l Tailor-made in house training programmes for Industry, Goyt. Departments and Public Services. It also offers specificprogrammes for Defence, Railways. Telecom and Public Utility Services.




Programme


EASTERN REGION

The following office Bearers of EIRC ofICWAI have been elected for the year2009-10 in the Council Meeting of theEastern India Regional Council held on8th August 2009 :

Manas Kumar ThakurChairman

Ajay Deep Wadhwa Vice-Chairman

cum Secretary

Pallab Bhattacharya Treasurer

The following members have beenselected as Executive CommitteeMembers for the year 2009-10 :

M. Viswanathan Chairman

Utpal Majumdar Vice-Chairman

Subrato Banerjee Secretary

Jaydip Ghosal Jt. Secretary

Sudip Dasgupta Treasurer

Kajal Mishra Jt. Treasurer

The following members have beenunanimously selected the office bearersfor the year 2009-10 :

Srinibas Mohapatra Chairman

Sambit Kumar Samanta Vice-Chairman

Manas Ranjan Lenka Secretary cum

Treasurer

Following members are the new officebearers for the year 2009-10 :

V. Nandagopal Chairman

S.C. Agarwalla Vice-Chairman

B.C. Mohapatra Vice-Chairman

Mihir Kumar Sahoo Secretary

S.C. Sahoo Jt. Secretary

Basanta Kumar Dash Treasurer

Regions & Chapters

AHMEDABAD CHAPTER

WESTERN REGION

The following office bearers wereunanimously elected for the year2009-10:

H. C. Shah Chairman

N. A. Shah Vice Chairman

P.H. Desai Secretary

V. H. Savalia Treasurer

The following members are the newManaging Committee Members for theyear 2009-10 :

S. B. Mundade Chairman

R. D. Khandalkar Vice Chairman

H. B. Shah Secretary

S. S. Kulkarni Jt. Secretary

L.G.Toshniwal Jt. Secretary

P.P. Mohani Treasurer

ASANSOL CHAPTER

CUTTACK BHUBANESWAR CHAPTER

ROURKELA CHAPTER

AURANGABAD CHAPTER

NORTHERN REGION

JHANSI CHAPTER


Sanjay Gupta Chairman

Rakesh Bhalla Vice-Chairman

B.L. Jain Secretary & Treasurer

The following office bearers wereelected for the year 2009-10:

S. K. Banerjee Chairman

R. N. Pal Vice-Chairman

K. R. Nair Secretary

P. V. Ramakanth Jt. Secretary

Sanjay Kumar Treasurer

The following members are the newManaging Committee Members for theyear 2009-10 :

A.K. Bhargava Chairman

KANPUR CHAPTER

NANGAL CHAPTER

SOUTHERN REGION

TRIVANDRUM CHAPTER

The following office bearers wereelected for the year 2009-10:

H.Padmanabhan Chairman

S.Hariharasubramanian Vice Chairman

S. Sathi Chandran Secretary

B.V. Subramaniam Treasurer

Rakesh Misra Vice-Chairman

D. S. Misra Secretary

S. K.Verma Jt. Secretary


R. L. Sharma Chairman

K. D. Bali Vice Chairman

Maninder Singh Secretary

Pradeep Chohan Jt. Secretary


Suraj Prakash Chairman

V. S. Gupta Vice Chairman

R.Venkataramanan Secretary

Chetan Mehar Jt. Secretary

G.P.Rao Treasurer

The new Managing Committee of theChapter for the year 2009-10 is asunder :

B. S. Gupta Chairman

P. L. Porwal Vice Chairman

P. C. Choudhary Vice Chairman

Y. L. Jain Secretary

NOIDA CHAPTER

UDAIPUR CHAPTER

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