The Hindu Business Line : Diligence in downsizing

To stay afloat, many companies in the private sector are resorting to layoffs and downsizing, pay-cuts and stretched working. What has been the record of public sector enterprises, with regard to labour, especially during comparable times of loss-throes, when the Government was divesting its control in the public sector?

The labour restructuring methods of these enterprises have been successful, opines Gopal Ganesh in Privatisation and Labour Restructuring ( www.academicfoundation.com ). “Privatised enterprises have been able to downsize labour without much of a problem.”

However, a downside to this assertion, he adds, is the lack of adequate social safety net for workers who opt for VRS (voluntary retirement scheme). “Workers who left under VRS were not given any training in entrepreneurship or retraining for alternative jobs,” observes Ganesh. “Neither was any counselling provided to them on how to use the compensation money.”

The author, therefore, argues that the Government should include a clause in the shareholders’ agreement making it incumbent on privatised enterprise management to provide counselling and training to VRS optees within a year of their having taken the VRS option.

Useful insights.

Standards study

As per the IFRS (International Financial Reporting Standards), foreign currency impacts of revaluations of fixed assets are recorded directly in equity, informs Mohan R. Lavi in IFRS, US GAAP, Indian GAAP, SOX – A compilation ( www.bharatlaws.com ).

“Exchange differences on AFS (available-for-sale) debt securities resulting from changes in amortised cost are recognised in income statement (same amount as if the bond is classified as held-to-maturity) and other changes in the carrying amount are recognised in equity.” In contrast, the Indian GAAP has no specific guidance on the issue. While on the topic, the author highlights another difference — that our standards do not define ‘functional currency,’ a phrase which the IFRS defines as the currency of the primary economic environment in which an entity operates, taking into account a list of primary and secondary indicators.

“If the indicators are mixed and the functional currency is not obvious, the management should use its judgment to determine the functional currency that most faithfully represents the economic results of the entity’s operations by focusing on the currency of the economy that determines the pricing of transactions (not the currency in which transactions are denominated.”

Recommended addition to the accounting professionals’ shelf.

D. MURALI

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