IFRS

Comprehensive income: The profit and loss account is going to look very different under IFRS. IAS 1 requires that all items of income and expense be presented either in a single statement — a ‘statement of comprehensive income'; or in two statements — a separate ‘income statement' and a second statement beginning with profit and loss and displaying components of other comprehensive income — ‘a statement of comprehensive income.'

Currently, in India, there is no concept of other comprehensive income. Under IFRS, an entity is permitted to classify expenses based on function or on nature, whichever provides information that is reliable and more relevant. Entities classifying expenses by function are required to disclose certain additional information on the nature of expenses. In India, Schedule VI requires an analysis of expenses by nature.

Financial instruments: In the area of ‘financial instruments,' you are likely to see major profit and loss impact. Gains and losses arising from derivatives that are not designated as hedging instruments are included in the profit or loss for the period leading to a great deal of volatility in the income statement and drastically changing the reported profit number.

IFRS is likely to restrict the de-recognition of financial assets, which means that fewer gains will be recognised upfront. Investment properties measured using the fair value model will also require changes in fair value to be recognised in the profit or loss.

IFRS has more detailed guidance on revenue recognition; hence there could be a difference in the revenue reported under Indian GAAP and IFRS.

Prior period items: Prior period items are also accounted differently under IFRS, with material prior period items being corrected retrospectively by restating the comparative amounts for prior periods presented in which the error occurred or if the error occurred before the earliest period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. Under Indian GAAP, prior period items are normally included in the determination of net profit or loss of the period in which the error is discovered with a separate disclosure so that its impact on the current profit or loss can be perceived.

Depreciation: Even the depreciation charge under IFRS, based on the component approach and the estimated useful life of an asset, could be quite different than that currently reported under Indian GAAP using the rates specified in Schedule XIV to the Companies Act, 1956.

Deferred taxation, share-based payments: Since the concept of “temporary differences” under IFRS is much wider than the concept of “timing” difference under Indian GAAP, even the deferred tax numbers will be different.

The accounting for share-based payments under IFRS 2 which covers share-based payments both for employees and non-employees could also impact the profit for the period as the use of the intrinsic value for determining the costs of benefits is prohibited under IFRS.

The conversion to IFRS may also change the components and calculation of finance charges and finance income.

Consolidation, JV: In the consolidated financial statements, the inclusion of assets and liabilities at fair values on the date of the business combination will change the related depreciation charge. Recognition of bargain purchases in the income statement will enhance the profit for the year under IFRS.

Also, if instead of using the proportionate consolidation method, the equity method is used for accounting for an interest in a joint venture (JV) under IFRS, the revenue and cost figures reported under Indian GAAP would undergo a change, thereby creating a perception that the volume of business has reduced which is not actually the case.

Windfall Profit Tax and crude oil price rises

Two days back my colleague suggested me to go for shortsell(it means that the selling the shares at the higher price and buy the share at the lower price difference between those were the returns) the oil company shares.He coined me the term "windfall Profit Tax".The particular tax has been imposed on the oil company by the goverment.Unforunately that particular stock didnt turn up the things what was expected to be.Then i had made some googling to find out the overview of windfall profit tax.So many questions were eating my mind. what is windfall profit tax? When it is coming into the picture?Why its used?Who is the benefitor?Why should my friend advised me to go for the shortsell?

A windfall profits tax is a tax on profits that ensue from a sudden windfall gain to a particular company or industry.In 1980, United States federal legislation was passed that levied such a tax on oil companies because of the profits they earned as a result of the sharp increase in oil prices brought about by the OPEC oil embargo. Since then, the tax has not been reenacted, however with gas prices once again reaching record levels there is renewed pressure on the U.S. government to bring back the tax. Amid low oil prices, the tax was ended in 1988 by President Ronald Reagen
The etymology of the phrase is from colonial times. "The crown precluded the colonists from using any lumber one foot or wider except whereby act of God, such as a severe storm, a tree falling on one's own property. If that happened, the colonists could use the tree that fell down on their property during a storm or they could sell it for a significant amount. So if you had a big storm on your property back in colonial days, and a lot of trees fell down, the resulting monetary reward was called 'a windfall profit.' It was a beneficial thing to a property owner, because they had limits on how much lumber they could use. But if an act of God came down and knocked a bunch of trees, they could use whatever they had. There were no limits on it and they could sell it or use it for their own construction purposes, hence windfall profit."

In our country windfall profit tax were controlled by the commerce and finance ministry.The reason why the topic came to my mind,we all know that left has withdrawn the support for the UPA government except SP(Samajwadi Party).Samajwadi Party General Secretary Amar Singh has demanded the government should levy windfall tax to the Mukesh Ambani led Reliance Petroleum Limited(RPL) and cancel the other concessions to the private sector petroleum firms.
I thought that what have made this statement so robust next to the nuclear deal and anxiously want to know about the root of this issue.The reference to the above statement http://www.rediff.com/money/2008/jul/08oil1.htm

First came to my mind is sky-rocketing crude oil price in the global market effect.Why the crude oil price rises day by day?Who is acting behind the crude oil price?.The high crude oil prices are due to what is happening in the US- the financial crisis and the lowering in value of the US dollar, as well as the associated speculative activities in the petroleum market and other commodities. The mismanagement of US Economy is a chief factor responsible for Oil prices surging over $140/Barrel. Crude oil price is no longer controlled by OPEC,it is denominated by US.Trade market is in New York and in London,so mainly US will decide the price.Today the oil price were determined by the financial companies-turned-oil traders, Goldman Sachs, Citigroup, J P Morgan Chase, and Morgan Stanley who enters into the oil futures or derivative contracts.They who place the bets on oil price and made to become high day by day.The crude oil price and dollar have direct relationship.Crude oil purchases made by US dollars over the thirty five years.So these crude oil were refined by oil refinery firms such as Mukesh Ambani led Reliance Petroleum Limited.They (private refiners) are earning Rs 15 per barrel and a profit of $6 billion.
SP general Secretary Amar Singh said IOC alone would lose over Rs 1,500 crore (Rs 15 billion) annually as it is forced to buy products at a higher price from an EoU.There is no point to blame Reliance Petroleum Limited for the rise in oil price.If India is rising the crude oil price because of the higher price in global market.Dont blame on the Indian government for the sky rocketing crude oil price.If private companies have the crude oil refined,then government can get the oil directly from them.

Inflation Targeted

Nowadays the much more talked word Inflation is making the centre stage in recent newspaper.What is Inflation mean?.Why the Finance Ministry and RBI worrying over the soaring of inflation?.Is it like the Inflation is big gaint(Goliath)?.Let me come to the point,Inflation defined as the increase of general level prices in the goods and services.Inflation is intrinically linked with the money where the money chasing to few goods.Around one year back,cement and milk products were soaring up,so Finance Ministry banned to export the cement and milk products.This is clear view that whenever the demand for the products rises,supply of money is also geared up.By how much do the prices go up? At what rate do the prices do up?.The rate at which the prices of everything go up is called the "rate of inflation".

In 2005-2006,the price of an product is Rs.100 and in the 2007-2008,the price of same product becomes Rs.105.Then the rate of inflation is 5%.If the RBI's interest rate is lower than the inflation rate,then the economy growth will be negative.Therefore the banks will not able to give the desired returns.This means that more amount of money has been pumped out towards the services and products.In controlling the inflation,RBI plays the vital role by tightening the interest rate and hike in the repo rate. By this approach, money flows on the demand goods decreased.The rate charged by RBI for its Repo operations is approximately 8% and Reverse Repo rate is approximately 6.00%.When RBI lends money to bankers against approved securities for meeting their day to day requirements or to fill short term gap.It takes approved securities as security and lends money.This approach will slow down the economic growth of our country because the demanded goods were restricted.

Recently Inflation in India targeting approximately 12% because of the global action(mainly on increase in crude oil price).Partly effect done by using the credit card,loan contracts,future and options in Commodies market becomes mushrooming and lifts the inflation higher.In near future,Inflation in India headed towards 15%.The Government has the power to reduce the partly effecting issues.By doing this alone,inflation wont go down.This alarm to wake people to investment more in various sector like insurance,mutual fund,fixed deposit,ULIP,pension fund,bond market.By this inflation will reduced to some extent.These few ways to keep down the inflation.

All about Nuke deal and Left party stands

The Left party started to pull off the rug from under the UPA government.According to our PM stands not to lay off the Indo-US Nuke deal and also wanted to go forward,negotiation with the IAEA(International Atomic Energy Agency).He is ready to gather the support from the many nations.But the left breached the art and science of negotiations by shutting the doors without any ventilation for keeping the talks open.First of all,Section 123 of the United States Atomic Energy act of 1954 titled "Cooperation With Other Nations", establishes an agreement for cooperation as a prerequisite for nuclear deals between the US and any other nation.This agreement is named as 123 agreement.U.S. will provide access to civilian nuclear technology and access to nuclear fuel in exchange for IAEA-safeguards on civilian Indian reactors.

Why US had chosen India for this Nuke deal?This is because India's strong non-proliferation record and stable democracy further helped justify a nuclear pact with India . This brings India closer to NPT(Non Proliferation Treaty) and IAEA have eye on its nuclear energy activities.

What is the benefit India and US gets in this deal?India is the fast growing country and has a lack of energy to accelerate and maintain the economic growth.The U.S. also expects that such a deal could spur India's economic growth and bring in $150 billion in the next decade for nuclear power plants, of which the US wants a share. It is India's stated objective to increase the production of nuclear power generation from its present capacity of 4,000 MWe to 20,000 MWe in the next decade.But India has already the self sufficient reserves of natural uranium necessary for the largest possible nuclear arsenal it may desire.

Why the left were opposing to the Nuke deal?The left party stated that the nuclear reactor plant will be insecure if the deal made.Also US so far doesn't keep up its words for instance,what happened to the assurances it made after the dissolution of the Warsaw Pact? Where are those declarations today? I will allow myself to remind this audience what was said. I would like to quote the speech of NATO General Secretary Mr Woerner in Brussels on 17 May 1990. He said at the time that: “the fact that we are ready not to place a NATO army outside of German territory gives the Soviet Union a firm security guarantee”. Where are these guarantees?.

Instead of threatening to withdraw the support,provide the rooms to negotiate or to desist from invoking the objectionable provisions of US.On the whole,The Left party should consider the nation's interest and be justify to the statements.

Indo-US Nuclear deal

*The legislation amends Section 123 of the Atomic Energy Act of 1954. It lets the US make a one-time exception for India to keep its nuclear weapons without signing the Nuclear Non-Proliferation Treaty (NPT).
*The amendment overturns a 30-year-old US ban on supplying India with nuclear fuel and technology, implemented after India's first nuclear test in 1974.
* Under the amendment, India must separate its civilian and military nuclear facilities, and submit civilian facilities to inspections by the International Atomic Energy Agency (IAEA).
* Henceforth US make a lucrative roadmap to monitor the India's Nuclear Policy.
* Critics say it undermines the NPT, which holds that only countries which renounce nuclear weapons qualify for civilian nuclear assistance.
* The accord sends the wrong message: it could undercut a US-led campaign to curtail Iran's nuclear program, and open the way for a potential arms race in South Asia.
* India says 14 of its 22 nuclear facilities are civilian. Critics say the pact could make bomb making at the other eight easier, as civilian nuclear fuel needs will be met by the US
* US President George Bush calls the deal necessary to reflect the countries' improved relations. It strengthens international security by tightening US ties to ally India, the world's biggest democracy. It also ensures some of its nuclear industry will undergo international inspection.
* New Delhi, which relies on imported oil for some 70 per cent of its energy needs, says nuclear power will help feed its rapidly expanding economy.
* France, which signed a similar deal with India in February 2006, says the move will help fight climate change and aid non-proliferation efforts.