The discussion is not depreciation as tax law stipulates, but percentage values that experts predict a car will lose over time.
So, to know what our tax and company laws say on the subject I hurriedly look for a book, and what catches my eye is Depreciation & Losses by T. N. Manoharan, published by Bombay Chartered Accountants' Society (www.bcasonline.org). Rates of depreciation prescribed in fiscal law may not relate to the usefulness of the asset, points out the author. Thus, the written-down value that shows in the books, as in the case of the above cars, may not translate as realisable value in the market.
Manoharan clarifies the provisions through many solved problems. Jagan Co is one such. The company uses its lorries for transportation of goods manufactured by it, and when there is no load to carry, the lorries are hired for carrying others' load. Question: What rate of depreciation can Jagan claim?
Another query is about rigs and compressors mounted on a lorry, where you'd know that what are mounted cannot be called part of lorry. Yet another poser is from a theatre owner who built the cinema hall using borrowed funds. He wants to know, not which movie to screen next, but if he can capitalise the interest paid up to the date of putting the theatre into use.
Read this to appreciate your knowledge of depreciation.
In the company of governance
The Prof's site (http://mba.yale.edu/faculty/professors/lopez.shtml) informs that he has worked as a consultant to the IMF and the World Bank on corporate governance issues, and been "an advisor to the governments of Russia, Peru, Malaysia, Egypt, Yemen, Colombia, Costa Rica and Mexico on issues of financial markets' regulation, corporate and bankruptcy law reform, industrial policy and privatisation." So, with great scepticism, I turn the pages of Corporate Governance, from The Institute of Company Secretaries of India (www.icsi.edu), a book on `modules of best practices'. The preface by the president of the ICSI begins with a flourish: "Corporate governance is the mechanism by which the values, principles, policies and procedures of a corporation are inculcated and manifested. The essence of corporate governance lies in promoting and maintaining integrity, transparency and accountability in the higher echelons of management."
One of the chapters in the book speaks of `model code' that lists desirable elements in disclosures. These include history of equity, human resource accounting, brand valuation, environmental protection measures, women's development, and so on.
Total shareholders' return or TSR is also among the recommendations; it is calculated "by deducting the open market capitalisation from the closing market capitalisation and then adding the dividend outgo to it," and the gain, if any, is expressed as a percentage of the opening market cap.
A book that can offer a favourable GKR, that is, governance knowledge return.
Circulars to go around
"This action on the part of the firm was also within the mischief of the penal provisions of the Companies Act relating to the offer and sale of shares. The Government desires to observe that the stockbrokers with their specialised knowledge of company matters are expected to maintain a strict code of conduct.
This is the text of a fifty-year-old circular that finds a place in Circulars & Clarifications on Company Law, from Taxmann (www.taxmann.com). The arrangement is section-wise, and to help thumbing through, there is a subject index, using which I spot a 1972 Circular Letter on the signing of audit reports. It decries the then prevailing practice of signing in `firm name' and making "a separate disclosure to the Registrar about the identity of the partner".
It mandates, "The partner concerned should invariably sign in his own hand for and on behalf of the firm appointed to audit a company's accounts." Useful reference material.