If increasing subsidy bill is giving headache to P Chidambaram, he has found succour in higher direct tax collections. Direct tax receipts from companies and personal income have reportedly, increased 71.3% (ET June 19) in the first two months of the current year compared to the same period last year.
This may be too early to predict the collections for the full year, but if one goes by past records the finance minister has every reason to be optimistic. After all, rationalisation of tax structure has been giving good dividends. Despite a fall in tax rate, collections of corporate tax have increased steadily.
An ET survey of 200 large companies finds that their aggregate tax provisions have increased 28.3% in 2007-08 over the previous year.
The bigger question, however, is: Does a rise in tax collections automatically imply success of the restructuring process of corporate taxation? After all, higher tax collections last year could be the result of higher profits. As demand picked up following improvement in macro fundamentals, India Inc witnessed an all-round prosperity.
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Showing posts with label BPO News. Show all posts
Showing posts with label BPO News. Show all posts
The judiciary may soon have a lesser role in dictating the way corporate houses show valuation of companies they acquire.
Come April 2011, the country is all set to adopt global accounting standards making it easier for India Inc to get large valuation M&A deals executed without the court breathing down their necks.
Even as the present rules put the courts at a higher pedestal over the prevalent accounting standards, the ministry of corporate affairs along with the apex accounting body ICAI are working on harmonising the legal and other regulatory requirements with the International Financial Reporting Standards (IFRS). IFRS does not recognise the judiciary prescribing accounting policies which are highly technical in nature.
Under the present regulatory mechanism, the companies which intend to enter into M&A agreements first apply before the concerned High Court seeking permission to hold a shareholder meeting and subsequently to execute the deal. The process could drag for several months before the courts approve such M&A agreements as it involves considering the interests of all stakeholders including lenders and minority shareholders.
Even as the courts have been given wide powers to examine the procedural formalities as well as for evaluating the financial position of the companies, on several occasions courts have taken a view divergent to the prevailing accounting standards.
The scenario wherein the existing accounting standards had to make way for judiciary prescribed accounting treatment is soon to change. IFRS has laid down extensive accounting regulations relating to business combinations including amalgamations and acquisitions.
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Come April 2011, the country is all set to adopt global accounting standards making it easier for India Inc to get large valuation M&A deals executed without the court breathing down their necks.
Even as the present rules put the courts at a higher pedestal over the prevalent accounting standards, the ministry of corporate affairs along with the apex accounting body ICAI are working on harmonising the legal and other regulatory requirements with the International Financial Reporting Standards (IFRS). IFRS does not recognise the judiciary prescribing accounting policies which are highly technical in nature.
Under the present regulatory mechanism, the companies which intend to enter into M&A agreements first apply before the concerned High Court seeking permission to hold a shareholder meeting and subsequently to execute the deal. The process could drag for several months before the courts approve such M&A agreements as it involves considering the interests of all stakeholders including lenders and minority shareholders.
Even as the courts have been given wide powers to examine the procedural formalities as well as for evaluating the financial position of the companies, on several occasions courts have taken a view divergent to the prevailing accounting standards.
The scenario wherein the existing accounting standards had to make way for judiciary prescribed accounting treatment is soon to change. IFRS has laid down extensive accounting regulations relating to business combinations including amalgamations and acquisitions.
Read More Article...
Companies giving stock options to their employees to retain them are expected to see a drop in their profits as they adopt international accounting standards.
The International Financial Reporting Standards (IFRS) that companies have to adopt from April 2010 require them to value the cost of employee stock options as per their fair value and charge for it over the service period. That is, if the share price moves above the price at which the employee is given a right to purchase, then the option value, multiplied by the number of shares, has to be shown in the company’s profit-and-loss account as a cost, explained PricewaterhouseCoopers partner Sunder Iyer. This has the potential to reduce the company’s profitability and earnings per share significantly, accounting experts said.
Companies now have the option to value their Esops as per their fair value, but most of them do not do that since they have the option not to. But once the IFRS becomes mandatory, they lose this option.
Although the right to purchase the share was given at a price close to the market price on that date, they did appreciate over a period of time. This appreciation has made the employee stay with the company. Although the company has not given any discount on the date when the employee has exercised the option, he did benefit from its appreciation.
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The International Financial Reporting Standards (IFRS) that companies have to adopt from April 2010 require them to value the cost of employee stock options as per their fair value and charge for it over the service period. That is, if the share price moves above the price at which the employee is given a right to purchase, then the option value, multiplied by the number of shares, has to be shown in the company’s profit-and-loss account as a cost, explained PricewaterhouseCoopers partner Sunder Iyer. This has the potential to reduce the company’s profitability and earnings per share significantly, accounting experts said.
Companies now have the option to value their Esops as per their fair value, but most of them do not do that since they have the option not to. But once the IFRS becomes mandatory, they lose this option.
Although the right to purchase the share was given at a price close to the market price on that date, they did appreciate over a period of time. This appreciation has made the employee stay with the company. Although the company has not given any discount on the date when the employee has exercised the option, he did benefit from its appreciation.
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