Monday, May 18, 2015

To Bite, Chew; AND Digest , if feasible >

Not unrelated ?! 
SEBI (Another roll back- of yet another impulsively introduced 'regulation'?! )

Start-up listing: Sebi may further relax proposals

Could halve minimum investment size from what was proposed in March paper, plus other concessions; to approve framework next month

< The disclosure requirement would not require start-ups to disclose objects of an issue if the money was raised for commercial purposes. The basis of the issue price would require disclosures as deemed fit by the issuer, and disclosure of litigation depending on its relevance. >


1% tax above GST may hurt Make in India: CEA

Says time is right for RBI to cut rate...

"It is not that everything that China does should be imitated but that's a lesson we need to learn...." Moreover, he added, most countries are trying to keep their currencies competitive and cheap. "The question is how we should respond. We should take defensive action. At the very least, we should not allow our currency to become more uncompetitive. We should keep it (Rupee) competitive if we want Make in India to be a long-term success. We have to have a very supportive currency policy.


 SEBI’s Interim Measure in an Insider Trading Case
Findings of SEBI’s investigation
- The information relating to the acquisition was a deemed 'price sensitive information' until it was published;


It’s time India Inc stopped whining

From chaos To order Monkik/ The economy has revived and the Centre has shed its policy paralysis. Corporates now need to rework strategy »

May 2015

IFRS 15 – A New Approach to Revenue Recognition

The US GAAP contained exhaustive literature on revenue recognition, that was based on broad  concepts and backed up by industry specific  guidance and has resulted in different accounting  for similar transactions across industries. On the  other hand, IFRS had principles based guidance  for revenues mainly based on IAS 18  Revenues and  IAS 11  Construction Contracts and a few other interpretations, which was limited and failed to  provide help in case of complex transactions. This, at times, made the IFRS preparers look towards  US GAAP for guidance. This new standard among  others aims to fulfill the gaps in both the accounting  frameworks by removing the existing weaknesses,  enhance comparability, improved disclosures and provide a more robust framework for addressing the  issues.

The core theme of the standard is that the entity has to recognise revenues in its financial statements to depict the transfer of goods and services to the customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for them. The standard prescribes five core principles which the entity has to apply for the purposes of determining the amount and timing of revenue recognition:

• Identify the contract(s) with a customer.

• Identify the performance Obligations in the contract.

• Determine the transaction price.

• Allocate the transaction price to the performance obligations in the contract.

• Recognise revenue when (or as) the entity satisfies a performance obligation.

Identify the Contract

The standard shall be applied when there is a  contract with the customer. There is no specification that the contracts must be in writing. Even oral  agreements constitute a contract if it is based on  the entity’s business practice. The current IAS 18  is silent on oral contracts; this may result in some entities being able to record revenues early as the  obligations are discharged rather than waiting for  signed documentation. The rights of the parties to the deliverables should be identified and the  contract should also have commercial substance, i.e. they should be transferring risks and cash flows  are expected to occur. It is not required that the  transaction price has to be specified in the contract,  as long as the entity has the right to receive the  payment and contract has some clauses based on which transaction price can be calculated, revenue can be accrued. It provides more guidance on evaluation of contracts for combining those which are entered and negotiated around the same time period and account them as a single contract for the purpose of accounting if certain criteria are met. Finally, it should be probable that the entity will collect the consideration to which it is entitled. 

<> Personal Reaction (to share some sporadic thoughts)
The standard prescribes five core principles which the entity has to apply for the purposes of determining the amount and timing of revenue recognition:
Of those, one is to, - ‘Identify the Contract’
As read and understood, most of the features  as set out under that head, besides also elsewhere, prima facie leaves one with grave doubts as to how anyone concerned,- to begin with the ‘preparer’ of the ‘accounts’, - is supposed to venture and go about applying and ensuring it is so adopted and complied in a given case, as intended. The doubts arise because of the lack of clarity sensed in/behind most of them.

For a specimen, HERE >

“.....Even oral agreements constitute a contract if it is based on the entity’s business practice.”

May be, those members of the CA fraternity in field practice, with the required familiarity or intimacy, especially with a reasonable IQ level, and specially trained and equipped , hopefully know and could identify and appreciate the intricacies ; and handle  so as to accomplish the best of results , to ultimately serve the avowed purpose of this  one Standard, just as any other lined up over the times.

Tail Note: Own critical, rather adversarial, thoughts,  on the practical utility or otherwise of such Standards, particularly from a business man's viewpoint, so also from that of the rest,- being the stakeholders in its comprehensive sense,- may be found given vent in the related old Blogs.   


Harayana VAT must incorporate provisions to exclude value of land from works contract: High Court

Where assessee, a builder/developer, entered into agreements with prospective buyers to construct flats, etc. and thereafter sell same with some portion of land against valuable consideration, activity of assessee would be covered under term 'works contract' but Assessing Authority was to be directed to pass fresh assessment order
Facts :
1) Assessee, a builder/developer, entered into agreements with prospective buyers to construct flats, etc., and thereafter sell same with some portion of land against valuable consideration.
2) Assessing Authority in terms of circulars dated 7-5-2013, 4-6-2013 and 10-2-2014 providing for levy of VAT on builders, etc., levied VAT on transaction of sale of flats, floors and villas effected by assessee.
3) Assessee filed writ petition for declaring provisions which include value of land for charging VAT on developers to be ultra vires the Constitution.
High Court held partly in favour of assessee as under :
a) From a consideration of various decisions of the Supreme Court arising under article 366(29A) of the Constitution, it follows that the agreement between the promoter/builder/developer and the flat purchaser to construct a flat and thereafter sell the flat with some portion of land does involve construction which would be covered under the term 'works contract'.
b) Rule 25 provides for exclusions in respect of labour, services and other like charges and does not provide for any mechanism for exclusion of the value of land. Wherever developer/builder/promoter or the sub-contractor who carries on construction work in a works contract maintains proper accounts, it shall be on the basis of actual value addition on account of goods utilized in the property. Rule 25(2) provides for deduction of charges towards labour, services and like charges and where they are not ascertainable from the books of account maintained by a developer, etc., the percentage rates are prescribed in the table provided in the said rule.
c) It is necessarily required to provide mechanism to tax only the value addition made to the goods transferred after the agreement is entered into with the flat purchaser. The 'deductive method' thereunder does not provide for any deduction which relates to the value of the immovable property. The legislature has not made any express provision in rule 25 for exclusion of value of immovable property from the works contract and its method of valuation has been left to the discretion of the rule making authority.
d) Essentially the value of immovable property and any other thing done prior to the date of entering into the agreement of sale is to be excluded from the agreement value. The value of goods in a works contract in the case of a developer, etc., on the basis of which VAT is levied would be the value of the goods at the time of incorporation in the works even where property in goods passes later on.
e) Further, VAT is to be directed on the value of the goods at the time of incorporation and it should not purport to tax the transfer of immovable property. Consequently, rule 25(2) is held to be valid, but State Government shall bring necessary changes in the said rule inconsonance with the above observations - CHD Developers Ltd. v. State of Haryana (2015) 57 315 (Punjab & Haryana).

Koothattukulam Liquors v. Dy. CST [2015] 53 3 (SC) (para 48) followed.

Highlight of the day

Jeffrey Loop, an attorney and photographer, agrees that keeping a low profile is the best way to avoid a photography-related entanglement. “If you are taking photos on the aircraft and are asked to stop, don’t argue or take offense,” he adds. “Just stop and save yourself a heap of potential trouble. Arguing with cabin crew about your perceived rights will almost always be a losing proposition.”
Why are airlines so photo-sensitive? Part of the reason is surely publicity; they don’t want to end up in a viral video. Another part is security, which Shirazi’s incident only hints at.
Either way, it means that on your next flight, you’ll need to watch where you point that lens.

Having read, also given own thoughts, one feels strongly that while on the flight, human’s  itching, howsoever irresistible that be, to click  camera is to be decried; and  deprecated for more than one reason: While inside a plane, one has  a limited right to be flown as contracted, nothing more. For, after all, the aircraft is a private property of its owner, and certainly he has a lawful right to allow or prohibit any such act, without having to offer any reason; which, in a manner of legal speak,  verges on, and no different from, or better or worse than, - ‘trespass’. Temptation to “snap before the bubble bursts” has to be eschewed, rather restricted to individual’s self; not to be extended any further or beyond.
It is a common sense proposition; does not need a lawyer or jurist to be called upon to rake his brain  and give an ‘opinion’.

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