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To the Members of the ICAI Accounting Research Foundation

The Directors have pleasure in presenting the Seventh 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 2006.

The Institute of Chartered Accountants of India (ICAI) has promoted the ICAI ARF with the main objective to make it an academy for imparting, spreading and promoting knowledge, learning, education and understanding in various fields related to the profession of accountancy.  Recognizing that not enough emphasis has so far been laid in India on research in the areas of accounting, auditing and other related disciplines, and that the level of research needs to be raised to the international level, the Board has decided to support research projects of contemporary national and international significance in the aforesaid areas and has extended an open invitation to various institutions, research bodies, research scholars and practitioners and 23 Top Management Institutions were approached for promoting the Ph.D programmes under the aegis of ICAI ARF.   In order to ensure that a large number of research scholars desirous of pursuing Ph.D programme become eligible for the Infosys Fellowship Scheme, modifications have been undertaken to the Infosys Fellowship Scheme Agreement.

The Board has also decided to institute Research Chairs on the illustrative topics of high relevance e.g., Accounting and Accountability in Government, Corporate Governance, Financial Reporting, Corporate Social Responsibility, Environmental Accounting, Audit Committee, etc.  Towards this end, the Planning Commission and Top 50 Indian Companies As well as Top Management Institutions have been approached.  M/s. Infosys Technologies Ltd, M/s. JSW Steel Ltd, M/s. Larsen & Toubro, and M/s Tata Consultancy Services Ltd have shown interest in this regard.  Guidelines on the Research Chair have been drawn and made available to these organizations.

Performance Highlights:

The ICAI ARF has completed another successful year 2005-06, and has actively pursued the objectives of 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, the revenue from research activities has gone up from Rs.105.32 lakh (2004-2005) to Rs.135.93 lakh (2005-06) for the reason that the major portion of the MCD and KMC projects were completed during the year.  As a result, the revenue surplus during the year was about Rs.99.57 lakh as compared to about Rs.46.66 lakh during 2004-2005.  Further, a sum of Rs.105 lakh has been appropriated towards building reserve for the year 2005-2006.

Accounting, Financial and Management Reforms in Urban Local Bodies

Municipal Corporation of Delhi (MCD) Project:  The project taken up in March 2002 had been successfully completed on 31st May 2006.  During 2005-2006, the ICAI ARF assisted the MCD in preparing and presenting their financial statements for the year ended 31st March 2005.  During the period from 2002 to 2006, Comprehensive Annual Financial Reports (CAFR) of the MCD was prepared for the years 2002-03, 2003-04 and 2004-05 and as was envisaged, assistance provided by the ICAI ARF to the MCD gradually decreased, and conversely, the input from the MCD itself in preparation of its CAFR increased.  Between the years 2002 and 2006, approximately 50 training programmes of various kinds were conducted.  Eight of these programmes were residential ones, meant for the Core Group of Nodal Officers.  The rest of the programmes focussed on Double Entry Accounting System, Computer Awareness, Bank Reconciliation, and Familiarization with New Data Formats.  In the implementation of the Fund Based Accrual System (FABS), the best practices were introduced with reference to the practices being followed in leading Municipal Corporations of the world, including the Birmingham City Council, Greater London Authority, the New York City Government, San Francisco Municipal Authority, Vienna Municipal Council as also those recommended by the Government Accounting Standards Board (GASB) and the Government Finance Officers Association (GFOA).  The ICAI ARF constantly updated the World Bank, ADB and other organizations on the progress achieved by the MCD.

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 these States.  As an extension to the MCD Project, ICAI ARF has also undertaken similar hand-holding project relating to conversion to accrual accounting system in the JJ & Slum Department.

Kolkata Municipal Corporation (KMC) Project:  The Project was taken up by the ICAI ARF in July, 2004 and was continuing in the current year.  The work of the KMC was supposed to have concluded by March 2006 but is likely to extend till September 2006 to complete the residual work and to ensure that all the reports furnished in respect of this project had been approved by the Internal Committee of KMC.

During these two years, the following deliverables have been provided to the KMC:-

  • Demonstrated effects of what improved presentation of accounts can achieve
  • Demonstrated effects of what improved financial analysis and management practices can provide
  • A large set of recommendations on how to convert such demonstrations-which must be considered as exceptional examples-to routine outputs and functionalities of the Municipal Finance and Accounts Department (MFAD)
  • Report on sustainability, containing specific recommendation of integrated capacity building exercise with organizational changes, and
  • Standardized formats of financial statements & established audit trails

The ICAI ARF has also provided a clear road-map for strengthening the Internal Audit Department of the KMC. It has assisted the KMC in appointing CA firms to conduct internal audit and train the KMC’s Internal Audit personnel.  Thereafter, a clear training plan was also provided.

During the year, the ICAI ARF has initiated/ continued with the following research projects: -

1. Infosys Fellowship Research Project titled “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.  Reporting system has been streamlined and the progress of the project is vigorously monitored to ensure that the work would be completed in time.

2. Study Group on Accounting Issues in Knowledge and Technology Intensive Industries: A Study 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.  The project was originally known as the ‘Accounting Issues in Knowledge Intensive Industries’ and the Study Group has currently decided in favour of the original title.  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 a large number of companies.  The responses received were collated, analyzed and examined in the light of the accounting policies and practices being followed in other countries.  The draft report has been finalised and the same is under consideration.

3. Developing Code of Governance for Non-Profit Organisations (NPOs): The study on Code of Governance for Non Profit Organization (NPOs) Sector is underway.  The same was considered by the Expert Group of ICAI ARF and the draft report is under preparation.

4. Electronic Commerce and Direct Taxation: The research project titled “Electronic Commerce and Direct Taxation” commissioned in August 2004, is now completed as per terms and conditions of the agreement.  It has been decided to use the compilation of the research work done in appropriate manner for dissemination of the same.

5. Financial and Accounting Reforms, Capacity Building and Related Strategies (EU Project):  The project on the “Financial and Accounting Reforms, Capacity Building and Related Strategies” as awarded by Delegation of European Commission to the Institute with twining arrangement with the ICAI ARF.  The European Commission has appreciated the high quality of outputs so far brought out.  The project is scheduled for completion by September 2006.  

6. Study of Fixed Income Securities Market in India:  The overall objective of this research project is to analyze the structure, development and trends in various segments of Indian fixed income securities market viz., central and state government securities markets, municipal and corporate bond markets and markets for Treasury Bills (TBs) and Certificate of Deposits (CDs) and Commercial Paper (CPs), in order to identify major issues and to suggest policy measures.  The project is underway.

7. Goods & Services Tax:  The ICAI ARF, as a pro-active initiative has decided to undertake a project in the area related to Goods & Service Tax and the Board in principle has approved the same.  Advertisements inviting expression of interest from the members are published in the Journal of ICAI and Newsletter of Regional Councils, as also hosted on the Websites of ICAI and ICAI ARF.

8. Impact of International Accounting Standards/ International Financial Reporting Standards on the wider stakeholders by Oxford University Business School (Accounting):  The Oxford University Business School has evinced interest in working together with the ICAI ARF particularly in the areas of Accounting.  In pursuance thereof, they have sent an outline of the research proposal titled “Seed-Corn Funding: The Impact of International Accounting Standards/International Financing Reporting Standards on the wider stakeholders and the proposal has been approved in   principle.  Detailed project document has been called for. 

As stated earlier, in order to promote research in accounting, auditing and allied areas, ICAI ARF has extended a general invitation to Indian Universities, research organizations, 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 and advertised through Institute’s Journal.

ICAI University:

As was informed in the previous Directors’ Report, pursuant to the decision taken by the Institute of Chartered Accountants of India (ICAI) for promoting a University, under the aegis of ICAI ARF, the Foundation obtained a letter of intent from the Government of Rajasthan, under the Rajasthan Self-Financed Private Universities Ordinance, 2004 for the allotment of land for the purpose of the University.   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, later enacted Rajasthan Private Universities Act, 2005 and requested ICAI ARF to apply afresh under the new Act.   Meanwhile, the Ministry of Company Affairs, Government of India advised not to use the name of ICAI or ICAI ARF, and not to provide financial assistance from the funds of ICAI or ICAI ARF.  The matter was taken up by the ICAI with the Ministry of Company Affairs and further action for implementation of the project was kept in abeyance. On consideration of further response received from Ministry of Company Affairs in April 2006, the Executive Committee of ICAI authorized the President, ICAI to explore various possibilities of future course of action.  And accordingly, action is continued and final outcome is awaited.  Hence the position in regard to University Project remains the same as was at the end of the previous year.

Accordingly, an amount of Rs.563.70 lakh has been shown under the head "University Project" on the assets side and contra under the head "Current Liabilities & Provisions" on the liabilities side of the balance sheet (including Rs.184.27 lakh - cost of land; Rs.170.43 lakh - leasehold rent and Rs.200.00 lakh - Public Deposit with Government of Rajasthan, etc.).  In view of the aforesaid, and as the response to the ICAI ARF request for waiver/substantial reduction of lease money payable is awaited from the Government of Rajasthan, no provision for the lease rent for the year 2005-2006 (Rs.170.43 lakh) has been made in the accounts.

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 throughout 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 organisations of repute, within and outside India would be further 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 the MCD and the KMC projects would also be considered, because they provide good field experience.

Conservation of energy, technology absorption, foreign exchange earnings and expenditure:

Conservation of energy: The level of energy consumption is minimal

Technology absorption:   Being a research organization, all the functions and resources are devoted towards research purposes. The MCD and KMC projects have been instrumental in building expertise in conversion of accounts to accrual basis.

Foreign Exchange earnings: There was no foreign exchange earning during the year. The foreign & Outgo exchange expenditure during the year was Rs.2,45,647/-.


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.  However, the Foundation has appointed a Dean in the month of July 2006.

Director’s Responsibility Statement:

As required by Section 217(2AA) of the Companies Act, 1956, Board of Directors confirms that:

  • In the preparation of annual accounts, applicable accounting standards have been followed with no material departure;
  • They have selected such accounting policies and applied these 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 2006 and of the income and expenditure of the Foundation for the year ended 31st March 2006;
  • They 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
  • They have prepared the annual accounts on a going concern basis.

M/s. P Aggarwal & Associates Chartered Accountants retire as the Foundation’s Auditors at the conclusion of this Annual General Meeting and have further confirmed their eligibility under Section 224(1B) of the Companies Act, 1956.

The Board takes 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, State Governments and their urban local bodies, MCD, KMC, European Commission, Multilateral Agencies, M/s. Infosys Technologies Ltd., Guru Gobind Indraprastha University and other authorities, experts, research scholars and individuals during the course of execution of the research projects as well as in other respects.

On behalf of the Board
For ICAI Accounting Research Foundation

Place:   New Delhi

(T N Manoharan)

Date:   1st September 2006

Chairman, ICAI ARF


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