The Hindu Business Line : Intelligent analysis of international accounting standards

TECHNICALLY reviewed by Liesel Knorr, Secretary General of the German Accounting Standards Board, and written by Barry J. Epstein and Abbas Ali Mirza is IAS 2004, from Wiley (www.wiley.com). The book assumes importance with IAS spreading its tentacles into the IOSCO and the EU. Listed companies throughout the EU need to apply the IAS instead of the previously employed national accounting standards, "for consolidated financial reporting purposes".

In their preface, the authors emphasise the practical approach they have adopted by incorporating "meaningful, real-world-type examples." Each chapter of the book includes ``a listing of professional pronouncements'' to guide the practitioner.

What Indian readers usually miss in texts about our Accounting Standards is the rationale, though most authors excel at reproducing lines from the AS without interpretation. But Epstein and Mirza would have nothing of that sort.

They provide the reader with "the underlying conceptual basis for the rules, to enable the reasoning by analogy that is so necessary in dealing with a complex, fast-changing world of commercial arrangements and structures." A special feature of IAS is that its design is more `principles based', explain the authors. It is less `prescriptive', so there is a ``a proportionately greater challenge'' for practitioners to apply the rules.

Let me turn to the chapter on `intangible assets' covered by IAS 38, "which was promulgated after a rather long and contentious gestation period". A rule of thumb that the standard proposes is to classify assets as either tangible or intangible "based on the relative or comparative dominance or significance" of the two components of the asset.

Then come examples: "Computer software that is not an integral part of the related hardware equipment is treated as software (that is, an intangible asset)," but OS or operating system software, "that is essential and an integral part of a computer", is to be treated as part of hardware. The authors comment: "The concept embodied in this standard is somewhat controversial, and in some respects also vague and unclear, being subjective and open to interpretation."

A must read.

On second thoughts, minutes arn't reports

Forget the promise that our Minister made about putting the Companies Act on the treadmill and making it slim. Look instead at Company Law and Practice by A. K. Majumdar and G. K. Kapoor, from Taxmann (www.taxmann.com). It takes but a few seconds to turn the pages and reach a topic that is enraging the Ambani brothers: Board minutes.

"Section 193 imposes a statutory obligation on every company to cause minutes of all proceedings of general meetings, board meetings, and meetings of the committees of the board to be recorded," write the authors. Are minutes the record of meeting happenings?

"A record of what took place would include any discussions, expressions of opinion, criticisms, amendments, observations, and so on which lead to the decisions." But that is a report, not minutes, the authors clarify. Minutes, therefore, contain record of the business transacted by the meeting as a whole. However, the summary of proceedings should be fair and correct.

The book cites the views expressed by the Institute of Company Secretaries of India that minutes should be recorded and initialled, signed and dated by the Chairman "as immediately as possible after the conclusion of the meeting".

The authors add that the word `minutes' has an element of urgency; "it is certainly not a desirable practice to allow months to pass before the minutes are signed, but that does not affect the question of admissibility."

A case law on the topic is that of Oberoi Hotels vs Observer Publications, where the Delhi High Court cited the Escorts Ltd vs Sai Autos — that the minutes are the only way to prove that a particular resolution was passed at a board meeting.

Though the company secretary is usually associated with minutes preparation, the situation changes when the court appoints a person to preside over Board meeting, as it happened in Nazir Hooesin vs Darayus Bhattena.

But there is a 1957 decision that Mukesh may find inconvenient: H. L. Bolton Engg vs. T. J. Graham and Sons, that the minutes are not conclusive evidence of the proceedings and therefore may be questioned. Which is what Anil seems to say too.

Good company.

BooksOfAccount@TheHindu.co.in

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