AS 11 : The burning Issue.

The economies of the globe are feeling the pinch of Recession and given the magnitude of meltdown, there is no surprise that India Inc. is trying its best to save its financials ( Profit and Loss Account and Balance Sheets) from bleeding. The Export service has already dived enough and the future appears to be no better. Many Indian Companies have exposure in foreign markets and Financial instruments denominated in Foreign currencies.

The accounting regulator requires that the foreign currency liabilities to be marked to market (to be simply put the amount of resource outflow that would be required to settle the liability as on the balance sheet date).(AS 11 requires foreign currency monetary assets and liabilities to be measured at the exchange rate on each balance sheet date. Any change in a monetary asset or liability that arises because of exchange rate variation is to be taken to the P&L account).

The rupee has depreciated sharply in the recent past. The companies having foreign currency liabilities need to mark the liabilities to market which means that the loss on MTM has to be charged to the profit and loss account. A simple example: ABC ltd borrowed $ 1,00,000/-( $1= INR 40). On the balance sheet date USD 1 is at Rs 52.This would mean that the equivalent INR liability would increase by Rs 12,00,000/- and the entire amount has to be charged to Profit and Loss account as a foreign currency loss. This would obviously change the face of Profit and Loss account.

However the Schedule VI of Companies Act 1956 allows companies to add the increase in Liability to the coressponding asset which was financed by the loan. In the above case if the loan was taken to purchase a Machinery, the company can add Rs. 12,00,000/- to the cost of the asset. This would mean that the company can show profits higher by Rs.12,00,000/-(less depreciation).

Though the Accounting Standards issued by the ICAI are mandatory in nature, in case of any difference between an AS and any provisions of Act, the Act would supercede the Accounting Standard. This means that companies are free to follow Schedule VI of the companies Act. Earlier when Rupee had appreciated, companies had no problems whatsoever in following the Accounting Standard 11.

The revised AS 11 is one of those standards that is almost fully in conformity with IAS 21, the corresponding international standard. Abandoning AS 11 would raise serious questions about the commitment of Indian companies to follow IFRS.

So India Inc. should not look at the volatility resulting from AS 11 from a narrow perspective. If financial performance is volatile, the function of accounting is to report that volatility. As Indian standards converge with IFRS, there will be a lot more volatility in the reported profit. A good accounting system should bring out the underlying volatility of a business, and not seek to hide it from investors and other users of financial statements. Volatility in the foreign exchange markets can be managed by hedging. Let us not fiddle with accounting to fix that problem.

The Importance of reference books.

The Study of Chartered Accountancy Course is quite different from other professional degrees like Doctors, Layers, MBAs etc. Unlike these courses, CA course is a distant education course. ICAI prescribes the syllabus and also provides the basic study material to the students. The students suppliment it with private tuitions and reference books to cover the syllabus comprehensively.

The Study Material provided by ICAI is best in quality. The material is prepared by Board of Studies and is second to none. The material covers the entire syllabus in a comprehensive manner. Many students do believe that if a student prepares from the study material only then also he can pass the CA exams.

But it is not just about passing and today's competitive world demands more. The changes are fast and the study material gets updated a little later. In case of final students the material is provided to them before two years of their attempt. Reference books play a dual role :
1. To keep students updated and
2.To help the students understand concepts with better clarity.

The study material may not be able to cover all kinds of problems or questions. So it is always better to have a good reference book handy to fill the gap. Reference books also help understand topics from diverse perspectives. The number of problems and questions which a student can prepare from increases. Reference books ,unlike the study material, have problems which are very simple and are needed to understand basics.

The list of reference books is available at www.icai.org and are updated from time to time.

I followed the following books for my PE II examination and were really good.

#Accounts- Shukla and Grewal
#Auditing- S material
#B.Law - ND Kapoor
#Costing - MAheshwari( Compilation of Costing is a bible)
#FM - Maheshwari but TRastugi is far better
#Income Tax- VK Singhania, Girish Ahuja, Bandana Bangar. If u want to learn advance concepts gp for singhania and others may refer Ahuja
#Info tech- S Material


Apart from reference books students must also purchase compilations and sugested answers published by ICAI. These publications help students to understand the manner in which they should attempt exams. The summary of examiners comments given at the end of suggested answers are a must read. Revision Test Papers published by ICAI also help in preparation for exams.

Accounting Technician Course

To become an Accounting Technician………

>>Enrol for Common Proficiency Test (CPT) after passing Class 10 examination

>>Pass 10+2 examination and CPT Enrol for Accounting Technician Course (ATC)

>>Successfully complete 9 months of Study Course

>>Successfully complete Orientation Course of one week spanning over 35hours and covering topics, such as, personality development, communicationskills, office procedures, business environment, general commercialknowledge, etc

>>Successfully complete Information Technology Training (ITT) or ComputerTraining Programme

>>Pass Group I of Integrated Professional Competence Examination (IPCE)
Group I is composed of four papers

>>Successfully complete one year work experience under a chartered accountant in practice or in industry

>>Get ATC Certificate Designate as Accounting Technician

Scope for acquiring CA qualification, even after becoming Accounting Technician
>>Enrol in Group II of Integrated Professional Competence Course (IPCC)

>>Register as Articled Assistant for a period of 3 years

>>Pass Group II of IPCE Appear in IPCC Final Examination during last 6 months of 3 years of articled training

>>Pass both the Groups of IPCC Final examination Complete remaining period of articled training, if applicable

>>Successfully complete the Course on General Management andCommunication Skills Get

>>IPCC Final Examination Certificate Enrol as a member of ICAI and designate as “Chartered Accountant”

Integrated Professional Competence Course

To qualify as a Chartered Accountant………

>>Enrol for Common Proficiency Test (CPT), after passing Class 10 examination

>>Pass 10+2 examination and CPT

>>Enrol for Group I or Group II or for both Group I and Group II

>>Successfully complete 9 months of Study Course

>>Successfully complete Orientation Course of one week spanning over 35hours and covering topics, such as, personality development, communicationskills, office procedures, business environment, general commercial knowledge et.

>>Successfully complete Information Technology Training (ITT) or ComputerTraining Programme Appear and pass Group I as well as Group II of Integrated ProfessionalCompetence Examination (IPCE)

>>Group I is composed of four papers and Group II is composed of three papers

>>Register as Articled Assistant for a period of 3 years, on passing either GroupI or both the Groups of IPCE

>>Get IPCE Certificate, on passing both the Groups of IPCE

>>Appear in IPCC Final Examination during last 6 months of 3 years of articled training

>>Pass Group I as well as Group II of IPCC Final Examination

>>Complete remaining period of articled training, if applicable

>.Successfully complete the Course on General Management andCommunication Skills

>>Get IPCC Final Examination Certificate

>>Enrol as a member of ICAI and designate as “Chartered Accountant”


>>Students already passed CPT but not yet registered as articled assistant till 31st January, 2009, and students who would be passing CPTexamination(s) being held in the month of December, 2008 can enrol themselves for IPCC upto 31st January, 2009, so as to be eligible to appear in the first IPC Examination to be held in November, 2009

TRANSITION PROVISIONS FOR EXISTING STUDENTS OF PE-II/PCE

FOR CONVERSION TO INTEGRATED PROFESSIONAL COMPETENCECOURSE/ACCOUNTING TECHNICIAN LEVEL FOR EXISTING PE-II STUDENTS

>>Existing PE-II students registered by virtue of having passed Graduate Degree shall continue to appear in PE-II examination till May, 2009.

>>Existing PE-II students registered by virtue of having passed PE-I Examination cancontinue, at their discretion to appear in PE-II examination till May, 2009 or switchover immediately to existing Professional Competence Course upto 30th June, 2009 and thereafter shall be com pulsorily required to switch over to Integrated Professional Competence Course Examination [IPCC].

>>Candidates who have passed one of the groups of PE-II or PCE shall be eligible forpaper wise exemption in IPCC/ATC

>>Students of PE-II will continue to get paper wise exemption [ secured on the basis of 60% and above marks] upon conv ersion in the corresponding paper(s) of PCE/IPCC for the remaining un-expired chance(s).

>>Eligible to grant of Accounting Technician Level Certificate after passing theremaining papers of Group I of IPCC and upon completion of three years of Articlesh ip or one year work experience after passing Group I of IPCC

>>Eligible to appear in Final Examinatio n after passing remaining pa pers of Group I andGroup II of IPCC and while in last six months of Articleship
Last PE-II Examination will be held in May, 2009

>>After passing Final Examination, completion of prescribed period of Articleship andGMCS Course, students will be eligible for membership of the Institute


FOR EXISTING STUDENTS OF PCE


>>Registration to Professional Competence Course will be upto 30th June, 2009

>>Last PCE Examination will be held in November, 2012. Thereafter, all students of

>>PCE will be compulsorily required to appear in Integrated Professional CompetenceCourse Examination [IPCC] effective from May, 2013

>>Students of PCE will continue to get paper wise exemption [secured on the basis of60% and above marks] upon conversion in the corresponding paper(s) of IPCC forthe remaining un-expired chance(s)

>>Students of PCE who have passed one of the Groups will be eligible for
grant of paper wise exemption in IPCC Examination

>>Students of PCE will continue to do Articleship as per deed of Articleship already executed

>>Students of PCE after passing Group I and Group II of IPCC will be allowed to appearin Final Examination during the last six months of Articleship

>>After passing Final Examination, completion of prescribed period of Articleship and GMCS Course, students will be eligible for membership of the Institute

IPCC -The way ahead!!!

The new course-IPCC (Integrated Professional Compentency Course) is being considered a welcome change my most of those related to this profession. It almost resembles to the PE I regime where in there was a ten months study gap between PE I and PE II. However a candidate needs to pass only group I of IPCC to register and commence articleship as against the requirement of passing both the groups. These announcements were made just before a batch took up exams on 14th December. So to reduce hardship for those students, ICAI has given option of either PCC or IPCC to these students.

Group I of IPCC consists of following subjects
1.Accounting
2.Law, ethics and communication
3.Income Tax.
4.Cost Accounting and Financial Management.

Group II of IPCC consists of following Subjects
5.Accounting.
6.Auditing.
7.Information Technology and Strategic Management.

Articleship period under the new scheme is 3 years and students would be allowed to take up final examination in the last 6 months of their training.(Akin to the Old final syllabus).

The most important difference in the new IPCC scheme is that a candidate can register for articleship after passing Group I on IPCC. This is especially beneficial for students who generally attempt one group at a time. The four subjects included in first group of IPCC will equip students better for audits. Also the study period of nine months will give students enough time to prepare for their audits. The most common problem in the current CPT-PCC scheme which the students faced was lack of maturity for audit and paucity of time to prepare for exams. IPCC seeks to address both the problems.

What should current batch of CPT do??
This dilemma can be found among most of the students who gave CPT this December. Whether to choose for PCC or IPCC has led to lots of confusion among students. I personally feel that IPCC is better for CPT students. Firstly, the study period of nine months ( it may extend to a year) will give time to the students to prepare for IPCC exams. In the current PCC regime, students have to immediately jump into audits for which they may not be prepared and/or matured. Also students find it difficult to manage audits and study side by side in PCC.

The completion period will almost coincide in both cases(i.e PCC or IPCC).So there may not me much loss of time. Instead of starting articleship immediately after 10+2, it would be better to gain some basic knowledge in audit and accounting domain and then start articleship.

CPT-PCC: Was it a failure???

In September 2006, when PE I was replaced by CPT (a course which required just two months after 10+2 when compared to ten months of PEI), it was clear that ICAI wanted to make CA as competitve as other courses. If a candidate cleared all levels in first attempt, he could qualify CA in four years after 10+2 when compared to 5 years for an MBA. It was a good vision indeed and the response was equally good. Last December itself there were about 95000 candidates appearing for CPT while hardly 30000 candidated appeared for PEI. The reason for increasing student intake was clear- meeting the excessive demand for Chartered Accountants.

The first batch of CPT produced astonishing results. With about pass percentage touching a never before seen 60, ICAI must have patted its back. The enrolments increased and ICAI had to increase the number of articles a CA could train in order to accomodate the increasing number students being eligible for articles.

What made ICAI rethink and almost roll back to previous scheme?

No doubt the student intake increased and probably the demand supply gap would have been met. When the CPT regime began, ICAI had assured that Quality would not be compromised. But why a shift again in just two years??

The prima facie reason seems to be the inability of most of CPT passed candidates to deliver results expected out of them. A PE II qualified student is supposed to be much mature and has a greater knowledge quotient then a CPT passed student. This may not be true for all cases but for 95% of cases it is.

They presumably did not deliver what was expected of them and many CAs did reject them. Given the fact that CPT syllabus mostly comprised of 10+2 Syllabus, the students cannot be expected to deliver more than what they are trained for.

Suddenly all fresh articles had to be CPT students and there was a dearth of articles who could perform equally good as PE II students. This meant much of a firm's resource had to be diverted in guiding fresh students. No doubt CPT students required more guidance and attention than PE II students.

After much thought ICAI almost rolled back to erstwhile scheme within two years of introduction of New Scheme. The latest scheme requires that a candidate must pass Group I of IPCC (Integrated Professional Compentency Course) to be eligible for articles. It also requires 9 months of study period after CPT. This means a candidate will roughly have one year and three months after his 10+2 before he joins articleship. Also the subjects of Group I ( Accounts, Audit and Law) shall equip students better for audits.

The scheme is still attractive. The course will take a little over four years. Hopefully this scheme works out for ICAI and we dont see such ad hoc changes again.


Accounting Technician Course
Getting into CA is easy but getting out is not. Keeping this in mind probably ICAI launched Accounting Technician Course for those students who unluckily could not see their dreams coming true. A ATC passed student may again enrol for final for which he has to clear Group II of IPCC and Articleship requirements.