The Hindu Business Line : Corporate reporting can make investors wiser

When a loss-making company creates a deferred tax asset, it may be a signal that the company’s management is optimistic of an early turnaround, writes Madhu Vij in one of the case studies included in Management Accounting ( www.macmillanindia.com ).

“This is because conservative accounting requires that a company recognise the tax savings from carry-forward losses only if there is reasonable certainty that the company will actually have book profits in the near future,” she explains.

“However, investors should make an independent assessment of the company’s financials to see if the losses are from one-time factors, which may be rectified in the future.”

The author advises that a good approach to reporting deferred tax liabilities and assets can be one that provides detailed disclosures on the opening balance of each component of deferred tax liability or asset, taking the reader through the additions and deductions during the year, and arriving at the closing balance as reported in the financial statements.

Vij also suggests that companies provide a statement explaining “why the taxation provision reported to shareholders differs from the standard tax rate applicable to them. This may leave investors much wiser about the sources of a company’s tax savings than is the case with deferred tax accounting, with all its complexities.”

Recommended read.

Inner clock

In the corporate world, politics and economics, there is often the compulsion to choose between values and profit, bemoans K. J. Joseph in You Too Can… He adds, however, that hoaxes don’t always succeed in business and that impostors get ultimately exposed.

There is an inner clock which signals in our conscious mind what the right path is, the author assures. “The balance of justice needs to be a beacon light in all public and private decision-making.”

Joseph concedes that doing the right thing can often demand effort, endurance, resilience, and detachment from being influenced by the opinion of others. Yet, “Our words and deed need to crystallise into a mirror which will reflect truth, wisdom, devotion, integrity, purity of soul, religious commitments and our highest values.”

Topical messages, in the light of what the corporate world is currently witness to, on the governance front.
Facing negatives

When selling life insurance, the more ‘Nos’ you hear, the closer you are to ‘Yes,’ declares Bharat Parekh in Adding More to Life ( www.bharatparekh.com ). He dissects the common objections into four categories, thus: No need, no money, no hurry, and no confidence.

As an example of the ‘no need’ variety, the author cites his response to a successful and healthy doctor who felt insurance was redundant since he was earning handsomely and was well-settled: “I replied very slowly, ‘Sir, you are the one who needs life insurance the most. When a professional man dies he leaves his family a highly educated brain and not a going business as a businessman dies.’ I continued, ‘Don’t you think that you should do something that would at least fill up the economic void that your absence would create?’”

Forceful arguments.
Articulate your goals

For some of us, a lack of inertia is sufficient, rues Andrew J. Sherman in Road Rules (Elevate). We may be content with the feeling that we are moving forward in the right direction, even if we are not too sure where we are headed or are travelling at a slow pace, he adds.

“We live our lives with a partial blindfold on at all times, letting life happen to us instead of attempting to influence its direction.”

Asking around his friends what their aspirations are, or what their New Year resolutions are, the author gets answers such as: ‘Staying above ground,’ ‘staying away from debt collectors,’ ‘avoiding my ex-wife,’ or ‘losing twenty pounds.’

While those are all admirable goals, they are short-term and small-minded in nature, and not a substitute for a life plan, a vision, and an articulation of true goals, Sherman urges.

“Avoiding death is an insufficient game plan for living life.”

Once you take the time to articulate your lifelong goals, it will be a lot easier to then build a navigational system to guide you and ensure that you are on the right path making the right decisions, he counsels.

“This will expedite the reaching of your destination with a minimal amount of bumps and bruises along the way.”

Worth a reflective study.
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D. Murali

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