To
the Members of ICAI Accounting Research
Foundation
The
Directors have pleasure in presenting the Sixth
Annual Report of the ICAI Accounting Research
Foundation (ICAI ARF), together with the Audited
Balance-sheet, Income and Expenditure Account
and Cash Flow Statement for the Financial Year
ended 31st March 2005.
The
Institute of Chartered Accountants of India (ICAI)
promoted ICAI ARF with the main objective to
make it an academy for imparting, spreading and
promoting knowledge, learning, education and understanding in the various fields
related to the profession of accountancy. Recognizing that not enough emphasis has
been laid, so far, in India on research in the
areas of accounting, auditing and other related
disciplines, and the level of research needs to
be raised at the international level, the board
has decided to support research project of contemporary national
and international significance in the aforesaid
areas and has extended an open invitation to
various institutions, research bodies, research
scholar and the practitioners. As one of the many initiatives, the board
has also decided to institute research chairs on
the topics of high relevance, for example
Accounting and Accountability in Government,
Corporate Governance, Financial Reporting ,
Corporate Social Reporting, Environmental
Accounting , Audit Committee. To begin with, the board has decided to set up three
chairs.
Performance
Highlights:
The
ICAI ARF has completed another successful year,
2004-05 and has actively pursued the objectives
of establishing the Foundation as a core
research body with facilities to undertake
research in the areas of Accounting, Auditing
and other related disciplines. In
financial terms, during the year the revenue
from the research activities has however gone
down from Rs.167 Lakhs in the year 2003-04 to Rs.
105.32 Lakhs for the reason that major portion MCD
Project was completed in the year 2003-04 and
that the scheduled completion of the new
research project i.e. KMC Project has been extended to July 2006 instead of
July 2005, for the reasons attributable to KMC. As a
result of the above the revenue surplus during
the year 2004-05 was about Rs. 46 lakhs as compared to about Rs. 99 Lakhs during
2003-04. A sum of Rs. 40 Lakhs has been
appropriated towards building reserve during the
year.
Accounting,
Financial and Management Reforms in Urban Local
Bodies
Municipal
Corporation of Delhi Project (MCD): The
first phase of the project taken up in
March 2002, had been successfully completed in
November 2003. During 2004, ICAI ARF assisted MCD in
preparing and presenting their 2003-04 financial
statements. Additionally, ICAI ARF was also involved
in comprehensively restructuring the budget
heads and in refining the accounting process in
the various Zones of the MCD. This work included a number of training
programme which were conducted by the team of
ICAI ARF. The
remuneration received for this application of
the concepts earlier developed, was Rs.50 lacs
(plus service tax).
In
the early 2005, the MCD revised the structure of
the second phase of the original agreement of
2002. The
earlier agreement had specified a compensation
of Rs.1.5 crore for phase II. Keeping in view the work done by ICAI ARF
during 2004, the MCD issued a separate work
order for the balance of Rs.1 crore, for a
different task, as advised by ICAI ARF itself.
The
task now being done by ICAI ARF consists of
handholding, and assistance in setting up the
Financial Management and Budget Office (FMBO).
This also involves preparing a guidance document
for budget monitoring and analysis, the
preparation of certain manuals, and assistance
in the finalisation of the 2004-05 accounts.
This phase was supposed to be concluded on 30th June, 2005, but due to certain administrative
reasons on the part of the MCD, it is now
expected to be concluded by the 31st October, 2005.
Kolkata
Municipal Corporation Project (KMC): The Project was taken up in July,
2004 and is still continuing for the current
year. During
the period under report, the nature of contribution of ICAI ARF was to assist KMC in the preparation
of its final accounts of 2003-04, carrying
number of studies on business processes,
conducting training programme for capacity building,
etc. In
the work relating to final accounts, ICAI ARF
has provided a number of technical inputs which
assisted KMC in dealing with a large number of
legacy problems.
During
the currency of the year, the team of ICAI ARF
has successfully completed the study on business
process reengineering of KMC, conducted a top
management training programme, as well as
several others, and is continuing to work on
other items in accordance with the terms of
reference of KMC Project. The work of KMC was supposed to have
concluded on 30th June, 2005 but has
been extended till March, 2006. The primary reason for the delay was the
local government election in West Bengal,
because of which practically no work could be
done for approximately two and a half months. Despite the new city government in place,
and also with a change in the top management of
the KMC, matters are still undergoing at a slow
pace. It
is expected that normal routine would resume by
mid September.
In
keeping with its stated objectives, the ICAI ARF
conducted a number of seminars on municipal
accounting all over the country, which were
attended by a large number of chartered
accountants. It is also heartening to note that
senior officers of the Union Government have
commented publicly that it was the pioneering
efforts of the ICAI ARF in MCD which gave rise
to a movement in the whole country for financial
and accounting reforms in urban local bodies as
well as different agencies of the government
itself. Members
of the ICAI have benefited from the fact that
States such as West Bengal, Rajasthan, Gujarat,
Haryana and Karnataka have now issued their
requirements for CA firms to do the work of
conversion of accounts in the urban local bodies
of those states.
During
the year, the ICAI ARF has initiated/ continued
with the
following research projects:-
1. Legal protection of Intellectual Property
Rights in Information Technology Industry: The
research project titled “Legal protection of
Intellectual Property Rights in Information
Technology Industry” under
the Infosys Fellowship Research Scheme is
underway. Certain changes have been contemplated
in the Infosys Fellowship Scheme Agreement, with
a focus to enlarge the scope of the agreement to
include the research scholars pursuing Ph.D from
other reputed Universities, to become eligible
under the Infosys Fellowship Research Programme.
2. Research Study on
Recognition, Measurement and Disclosure issues
in Bio-Technology and other life science
companies, Information Technology (IT) Companies
and advertisement companies: A Group on ‘Recognition, Measurement
and Disclosure issues in Bio-Technology and
other life science companies, Information
Technology (IT) Companies and Advertisement
Companies” was set up with the representatives
from the office of Comptroller & Auditor
General of India, The Institute of Chartered
Accountants of India, Technology Development
Board, Technology Networking and Business
Development Division (CSIR), Consultants
Development Council, and the Industry. Based on
the presentation made by the leading companies
in the areas, the Study Group has circulated a
questionnaire covering accounting and disclosure
issues to large number of companies. The
response received is being collated, analyzed
and examined together with accounting policies
and practices being followed in other countries.
The study is expected to be completed during the
course of the current year.
3. Developing a code of Governance for
Non-Profit Organisations (NPOs): The study
on Code of Governance for Non Profit
Organisation (NPOs) Sector is underway. The draft of the study prepared by
Investment Information and Credit Rating Agency
of India Ltd. (ICRA) on the above subject is
under consideration by the Expert Group of ICAI
ARF. The
study when completed, would suggest the model
code of governance for such organisations and
would be brought out as a research publication
under ICAI ARF.
4. Electronic Commerce and Direct Taxation: The study on Electronic Commerce and
Direct Taxation commissioned last year is likely
to be completed shortly. The final draft of the study is under
consideration by the Expert Group of ICAI ARF.
5. Financial and Accounting Reforms,
Capacity Building and Related Strategies: ICAI ARF joined the ICAI as
co-partner for submission of proposals for
carrying out research in the area of financial
statements and accounting reforms to the Small
projects Facility programme (European Union
Projects). Out of the above proposals submitted,
the proposal titled “Financial
and Accounting Reforms, Capacity Building and
Related Strategies” has been
accepted and is currently being pursued together
with the ICAI. The project is progressing as per the
schedule envisaged therein. As per the scope of
the project, a detailed study on nine shortlised urban local bodies on development of
institutional framework along with strategies
directed towards building capacity for undertaking the
suggested reforms has been carried out. As a
precursor to this project, the ICAI ARF has financed a
project on evaluating the capacity for financial
and accounting reforms in the cities of Amritsar,
Jalandhar, Ludhiana, Chandigarh, Shimla, Delhi,
Kolkata, Chennai, Mumbai, Nasik, Baroda and
Ahemdabad. The research report was circulated to
various concerned agencies including the World
Bank and Asian Development Bank.
6. Impact of International Accounting
Standards/ international Financial Reporting
Standards on the wider stakeholders: Oxford University of Business
School (Accounting) has sent a request to ICAI ARF for collaborating with them
for a research project on “Impact
of International Accounting Standards/
international Financial Reporting Standards on
the wider stakeholders” . An
Expression of Interest in principle has already
been communicated by ICAI ARF.
ICAI
ARF has launched its own website (www.icaiarf.org),
to share and spread the research initiatives
being undertaken under its aegis.
In
order to promote research in accounting,
auditing and allied areas, ICAI ARF has extended
a general invitation to Indian Universities,
research organisations, management institutions
and research scholars for making research
proposals to be assisted by ICAI ARF. A comprehensive format for expression of
interest has also been hosted on the website of
ICAI ARF. In particular, all leading
universities, management institutions, and
research organisations in the country were
invited to carry out a research on ‘Impact of
Accounting Standards on Stock Markets’. Expression of interest received is under
consideration by the Expert Group of ICAI ARF.
ICAI
University:
With
objectives of providing Commerce Education bench
marked at International Standards and promoting
Research in Accountancy, ICAI ARF, as per the
initiatives taken by the ICAI, decided to set
up/ sponsor ICAI University as a Private
University at Jaipur under the Rajasthan Private
Universities Ordinance 2004. A letter of intent was issued to ICAI ARF
in December 2004 and a land measuring 40.83
hectares (100 acres) was allotted to ICAI ARF
for setting up of the University. For this purpose ICAI ARF has also
created an Endowment Fund with Government of
Rajasthan. The possession of the land was taken on
27th January, 2005, and Foundation
Stone was laid on 3 February, 2005 by Hon’ble
Chief Minister of Rajasthan. With the above, a
sum of about Rs. 5.55 Crores was spent (Land
cost including lease rent- Rs. 3.54 Crores and
Endowment Fund- Rs. 2.00 Crores). In February, 2005 the
Government of Rajasthan considered certain
amendment to the law relating to Self-Financed
Universities in the light of the judgement of
the Hon’ble Supreme Court in professor Yashpal
Vs. State of Chattisgarh. The Ordinance issued
by the Government of Rajasthan could not be
converted into an Act within the stipulated
period and lapsed. Therefore, the Letter of
Intent issued also lapsed. The Government of
Rajasthan has accordingly requested to apply
afresh under the new Act. The Ministry of
Company Affairs, Government of India vide their
letter dated 1.4.2005 advised ICAI to prohibit
the use of name of ICAI or ICAI ARF by the
proposed University and not to provide financial
assistance from the funds of ICAI or ICAI ARF. On consideration of this, the ICAI
decided to respond to the Ministry by providing
required information/clarification. Further
action for implementation of the Project, till
the response of the Government is received was
suspended. Response to the Government was sent in
April, 2005. Further queries received vide Ministry of
Company Affairs, Government of India letter
dated 13.6.200, has also been responded by ICAI
vide letter dated 10.8.2005. The matter is being pursued with the
Ministry of Company Affairs, Government of
India.
Future
Plans:
Recognising
the fact that considerable efforts are required
to promote research in accounting in India, ICAI
ARF has taken a number of proactive measures for
undertaking applied research, and carrying out
research studies. ICAI ARF contemplates to take strategic
initiative to accelerate the process. ICAI ARF
would launch a promotional campaign for
establishing direct contact with the
Universities and other bodies on the one hand,
and reaching out to the potential researcher
through out the country, on the other. A list of
proposed research projects of contemporary
national and international significance would be
identified and expression of interest invited.
In select areas, ICAI ARF may directly undertake
research. Possibilities for networking with
research organisation of repute, within and
outside India would be explored. Series of
technical documents are proposed to be published
and focussed training programmes organised for
dissemination of technical knowledge and skills
to the Chartered Accountants and other
stakeholders. Initiative for applied research in
newer areas on the lines of those taken up under
MCD and KMC project would also be taken up.
Conservation
of energy, technology absorption, foreign
exchange earnings and expenditure:
Conservation
of energy: The level of energy consumption is
negligible and therefore, there are no matters
to report.
Technology
absorption: There are no matters to report. ICAI ARF,
as stated earlier, being a research organization, all the functions
and resources are devoted towards research
purposes. The MCD and KMC project have been instrumental in
building expertise in conversion of accounts to
accrual basis and related areas of municipal
bodies.
Foreign
Exchange earnings & Outgo: There were no foreign exchange earnings during the year. The
foreign exchange expenditure during the year was Rs. 138108/-.
Personnel:
There
are no employees on the payroll of the
Foundation and the activities are being pursued
through a team of consultants and researchers
supported by staff from ICAI.
Director’s
Responsibility Statement:
As
required by section 217(2AA), Board of directors
confirms that:
- In the preparation of annual
accounts, applicable accounting standards
have been followed with no material
departure;
- We have selected such accounting
policies and applied them consistently and
made judgments and estimates that are
reasonable and prudent so as to give a true
and fair view of the state of affairs of the
Foundation as at 31st March 2005
and of the income and expenditure of the
Foundation for the year ended 31st March 2005;
- We have taken proper and
sufficient care for the maintenance of
adequate accounting records in accordance
with the provisions of the Companies Act,
1956 for safeguarding the assets of the
company and for preventing and detecting
fraud and other irregularities; and
- We have prepared the annual
accounts on a going concern basis.
M/s.
P Aggarwal & Associates, Chartered
Accountants, the Foundation’s auditors retire
at the conclusion of this Annual General
Meeting. They
have signified their willingness to accept
appointment and have further confirmed their
eligibility under 224(1B) of the Companies Act,
1956.
The
Board take this opportunity to place on record
their appreciation for the continued assistance,
support and co-operation received from the
Ministry of Company Affairs, Government of
India, European Commission, MCD, KMC, Urban
Local Bodies of other State Governments,
multilateral agencies and other authorities
during its course of execution of the research
projects and otherwise. The Board also place on
record their deep appreciation for the
contribution received from Shri N D Gupta and
Shri J P Gokhale during the term of their
directorship with ICAI ARF.
On
behalf of the Board
(Kamlesh
S. Vikamsey)
(Chairman)
New
Delhi
12th September, 2005
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