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EDITORIAL The G-20 summit, called to ponder over the worst financial crisis in over 70 years, had many takers for India’s three point emphasis— on the need for a ‘global oversight’ and greater say for developing countries in the global financial system; need to ensure that prospects of emerging economies do not suffer; and the need to avoid the protectionist tendencies. The six-point action plan mooted at the G-20 summit also reflected the spirit of Indian stand on tackling the crisis, particularly the concern voiced by Prime Minister Dr. Manmohan Singh that the financial meltdown had exploded into a systemic crisis requiring a coordinated approach by world leaders. The broad plan included short-term action such as fiscal stimulus to boost domestic demand, restarting world trade talks, and expanding financial stability forum to emerging economies. It also agreed to long-term steps such as reforming the International Monetary Fund. Leaders of the G-20 made all the right noises on the need for greater transparency, regulation and international cooperation despite inevitable gaps in perception between major players— the US, Europe and developing countries. But those who looked upon G-20 summit as the ‘next Bretton Woods’– The Historic talks after World War II that led to a dollar-led new world economic order, are of course disappointed at its rather innocuous and nonconcrete conclusion. It is now obvious that the West will not countenance a new power structure beyond the G-7, whose heads still don’t seem to see anything wrong in the BRIC group not having legitimate say in global economic affairs. Prime Minister Dr. Manmohan Singh was forthright in campaigning for ‘inclusivity’ and greater say for developing countries, particularly India, in the global financial system. India, as a $1 trillion economy, has indeed a vital stake in the stability of the international economic and financial system. The prevailing global crisis has reinforced the need to have a new and more inclusive order of global oversight. India’s viewpoint that such a global oversight is a must to put in place an ‘early warning mechanism’ should be taken and acted upon seriously by the world leaders, particularly since the World Bank and IMF have virtually failed to provide such a mechanism. As a common regulation framework on global scale is too ambitious, India has rightly pitched for common prudential and regulatory standards for all financial institutions in the world and a convergence G-20 Summit and India of accounting standards to prevent collapse of global financial institution. Of course there should not be overregulation, but there must be some way by which countries can have global oversight with commonly accepted regulatory and prudential standards overseen by national regulators. It is welcome that the G-20 summit supported an action plan to reform the multilateral financial institutions and agreed to establish supervisory colleges for major cross-border financial institutions but what remains a matter of concern is that it fell short of announcing major regulatory breakthroughs. The second point of India’s stress at the G-20 meeting had been that the developing countries that are able to drive economic growth, particularly BRIC, should not suffer in the period in which the world grapples with the economic crisis. This meant that resources should be made available to such countries so that they can continue to grow and drive economic growth. It is good that the G-20 has agreed to help shore up liquidity in developing world. Thirdly, as has been rightly pointed out by Finance Minister P Chidambaram, the crisis should not be an excuse for the countries to go into a protectionist cocoon. Without the free flow of goods, services and capital, the world cannot recover and get back to the path of growth. It was indeed heartening to note the G-20 unity on the need to desist from trade protectionism and complete the Doha Round of talks. In the current scenario, global markets needed their political leaders to send out a signal of confidence and the G-20 summit probably has done enough to assuage fears. But the point of concern is that no mechanism exists to oversee the economic action plan agreed by world leaders at the summit. It is also not quite clear yet as to whether the incoming US administration was wholly on board with what the George W. Bush's team agreed at the meeting. As such, perhaps the more critical meeting will be the one scheduled for April 30, 2009— that’s were the fine print will be discussed. India should aim to be an influential voice of emerging economies at that meeting. — Editorial Board ICAI- Partner in Nation Building THE CHARTERED ACCOUNTANT 943 DECEMBER 2008
EDITORIAL BOARD EDITOR-IN-CHIEF CA. VED JAIN JOINT EDITOR CA. UTTAM PRAKASH AGARWAL MEMBERS CA. PANKAJ I. JAIN CA. JAYDEEP N. SHAH CA. PREETI P. MAHATME CA. MAHESH P. SARDA CA. V. MURALI CA. K. RAGHU CA. KASHI IN ENGLAND P. KHANDELWAL AND WALES CA. AKSHAY KUMAR GUPTA CA. VIJAY K. GUPTA SHRI MANOJ K. SARKAR CA. ANIL DANI CA. KRISHAN VRIND JAIN CA. S. SUNDARRAMAN CA. RAMESH KUMAR GOYAL SECRETARY SHRI T. KARTHIKEYAN K ICAI EDITORIAl TEAM VIJAY IJAY K KKAPUR K APUR, DIRECTOR NADEEM AHMED, SUSANTA K. SAHU NITIN JAIN, N.K. RANJAN THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ICAI Bhawan, Post Box No.7100, Indraprastha Marg, New Delhi-110002. Tel: + 91 (11) 39893989. •Exchange E-mail: Differences: journal@icai.org, •Overhauling the website: Indian •The www.icai.org Credit Crisis of 2008: •Limited Liability Schedule VI – AS 11 Banking – Basel II Accord Causes, Consequences and Partnership EDITORIAl SUPPORT, DESIGN AND MARKETING Implications for India •Greed or Bonus or Both? SPENTA MULTIMEDIA Celebrating 60 MITRA JOSHI SHIVAJI B. GAIKWAD th HERALDS NEW ERA OF PROFESSIONAL TIES Year of Excellence ADVERTISEMENTS SPENTA MULTIMEDIA MUMBAI: Spenta Multimedia, Peninsula Spenta, Mathuradas Mill Compound, N. M. Joshi Marg, Lower Parel, Mumbai- 400013. Tel: +91 (22) 24811022/24811025, Telefax: +91 (22) 24811021 DElHI: No - 7, 1st Floor, Nizamuddin (West) Market, New Delhi-110013. Tel: +91 (11) 46699999. BANGAlORE: House No. 64, 5th Block, 4th Cross, Koramangala, Bangalore-560095. Tel: +91 (80) 2553 4105/2553 9512. KOlKATA: 206-Jodhpur Park, Kolkata-700068. Tel: +91 (33) 2473 5896, Telefax: +91 (33) 2413 7973. CHENNAI: AKS Pooja Complex, 2nd Floor, Old No: 203 New No: 154, R K Mutt Road, Madavelli ( Next to Jagan Mohan Clinic), Chennai- 600 028. Tel: +91 (44) 4218 8984/85. HYDERABAD: Flat No. 2, Vimala Vihar Apts., Goutham Nagar, Dilsukh Nagar, Hyderabad- 500 060. ClASSIFIEDS: Minimum Rs.1000/- for the first 25 words or part thereof, and Rs. 250/- for five words or part thereof over and above first 25 words. Please contact: The Journal Section at ICAI Bhawan, Noida or call at + 91 (120) 3054847 or e-mail at journal@icai.org ICAI RESERVES THE RIGHT TO REJECT ADVERTISEMENTS SUBSCRIPTION RATES Inland subscribers: Rs. 1000 per annum Overseas subscribers (by sea mail): $ 150 per annum For Overseas Members / Subscribers n Air Mail Surcharge: Rs. 2100 per annum n Sea Mail Surcharge: Rs. 1100 per annum CA students: Rs. 1400 for 3.5 years Rs. 400 for 1 year Other students and Faculties: Rs. 600 per annum Printed and published by Vijay Kapur on behalf of the Institute of Chartered Accountants of India (ICAI). Editor: CA. Ved Jain Published at ICAI Bhawan, PO Box No. 7100, Indraprastha Marg, New Delhi- 110002 and printed at Spenta Multimedia, Peninsula Spenta, Mathuradas Mill Compound, N. M. Joshi Marg, Lower Parel, Mumbai - 400013. The views and opinions expressed or implied in THE CHARTERED ACCOUNTANT are those of the authors and do not necessarily reflect those of ICAI. Unsolicited Unsoli articles and transparencies are sent in at the owner’s risk and the publisher accepts no liability for loss or damage. Material in this publication may not be reproduced, whether in part or in whole, without the consent of ICAI. DISCLAIMER: The ICAI is not in any way responsible for the result of any action taken on the basis of the advertisement published in the Journal. The Members, however, may bear in mind the provisions of the Code of Ethics while responding to the advertisements. ad Cover: ICAI, ICAEW sign MoU THE CHARTERED ACCOUNTANT TOTAl CIRCUlATION: 1,86,000 Images by Dreamstime Volume 57 ● No. 06 ● December 2008 DECEMBER 2008 944 THE CHARTERED ACCOUNTANT Rs. 100 JOURNAL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ICAI-ICAEW MoU CONTENTS 943 946 950 952 954 955 976 EDITORIAL FROM THE PRESIDENT READERS WRITE ICAI PRESIDENT ON BOARD OF IFAC PHOTOGRAPHS ICAI-ICAEW MoU EAC OPINION 995 LEGAL UPDATE n Circulars and Notifications n Legal Decisions n Disciplinary Case 1033 PRACTICE UPDATE 1034 NATIONAL UPDATE 1035 INTERNATIONAL UPDATE 1036 ECONOMIC UPDATE 1037 ACCOUNTANT’S BROWSER 1038 NOSTALGIA n A Peep into the Past 1039 1040 1041 1052 1064 BOOK REVIEW CAREER WATCH QUESTIONNAIRES n Competency Mapping for Accountancy Professionals n Changing Profile of Profession in Context with Member Firms ICAI NEWS n Guidelines of The Council in the context of use of designation, etc. and manner of Printing of Letter-heads and visiting cards. n IASB Exposure Drafts n Revised Resolution passed by the Council under Regulation 190A n Training the Trainers Programme on IFRS n For the Atttention of ICAI Members Abroad n New Publications n ISA Assessment Test, December 2008 n Committee on Public Finance n Empanelment of Chartered Accountant Firms for the Year 2009-2010 n Announcement regarding CPE Credit Requirements for three-years rolling period 2008-2010 n Forthcoming Practical Workshops n Permission for Other Engagements by Students EVENTS
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Facts of the case: Shri Bharat D. B
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DECEMBER 2008 1008 THE CHARTERED AC
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forcing otherwise healthy banks to
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The real question is, given the rec
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etained in LLP Bill - 2008 and some
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If the partners do not execute the
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of Accounts and a Solvency Statemen
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e converted into a LLP by following
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y misrepresenting their earnings. I
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US$ Million USD 48.86 48.68 48.83 S
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1. What are my professional objecti
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) 25-35 c) 36-45 d) 46-55 e) 56-65
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& Icai news If yes, which areas ___
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& is 15 th December 2008. Icai news
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& a) Yes b) No Comments, if any ___
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& Comments, if any_________________
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IASB Exposure Drafts on: Icai news
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Icai news NEW PUBLICATIONS From the
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Icai news OFFICE OF THE COMPTROLLER
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Icai news Requirements The student
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(This Accounting Standard includes
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accounting treatments set out in pa
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inspection are complete. However, r
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(This Accounting Standard includes
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Some loans may be interest-free or
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Standard for Local Bodies: (i) Inte
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the business, to an entity’s abil
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l Ensuring employees are properly t
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strategies, and the related busines
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with governance is not adequate and
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in the preparation of financial sta
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further into the future, in conside
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Introduction 1. The purpose of this
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Introduction 1. The purpose of this
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for which controls are being assess
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