The Hindu Business Line : Numbers spill the beans

Published accounts are juicy stuff in the hands of the skilled analyst. Which is what makes Accounting & Analysis: The Indian Experience 2006, from Global Data Services of India Ltd (GDSIL), an interesting professional read. The book is in its third year of publication, and covers over 500 listed companies.

Madhu Dubhashi, CEO of GDSIL, informs that the Pune-based subsidiary of CRISIL is "a fully equipped centre, dedicated to analysing published accounts of companies". She explains in her Foreword that the analysis often involves reclassification of numbers to present them "in a standardised format that is simple and easy to understand."

Not much is known about what the seven-member Financial Report Review Board that the Institute of Chartered Accountants of India set up in 2002.

If you remember, the Board was "empowered to suo motu look into the published accounts of different organisations, including banks and financial institutions."

While that Board-talk may just be a case of sabre rattling, so characteristic of a regulator, there is enough and more to rattle the small investor in the book on hand.

For instance, one learns that, for the year ending March 31, 2005, Nalco's inventory increased by Rs 9.67 crore "consequent to change in the method of accounting of scrap", and correspondingly, other income rose by Rs 9.22 crore, even as the balance Rs 0.45 crore showed as fall in `incidental expenditure during construction'.

Equally unnerving are tales of: how impairment loss constitutes almost a fifth of loss before tax in RPG Cables; the tussle between auditor's qualification and legal opinion on capitalisation of revaluation reserves through bonus issue by Ecoplast; and the abysmally low 2 per cent that Indian Hotels earns on investments, which constitute more than half of total assets.

The book has chapters on receivables, intangibles, liabilities outside the balance sheet, deferred tax, cash flow, mergers and demergers, and human resource accounting.

An interesting snatch is from Infosys, which discontinued `the practice of allocating ESOPs' during the year ended March 31, 2004, "pending clarity in the regulations relating to grant of stock options as well as the accounting regulations relating to the same."

The final chapter, titled `variation between reported and adjusted profits', shows the effect of routing through the profit and loss account expenses that companies wrote off from reserves.

In the list of 124 companies, negative variance is 1,057.49 per cent for Ajanta Pharma, 1,622.48 per cent for Zee Telefilms, and a whopping 37,796.41 per cent for PentFasoft Technologies!

Mandatory read.

BooksOfAccount@TheHindu.co.in

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