TO THE MEMBERS OF ICAI ACCOUNTING RESEARCH FOUNDATION

The Directors have pleasure in presenting the Tenth 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 on 31st March 2009.

The ICAI ARF promoted by the Institute of Chartered Accountants of India (ICAI) has accelerated its work programme during the year as an academy for imparting, spreading and promoting knowledge, learning, education and understanding in the various fields related to the profession of accountancy. The ICAI ARF has undertaken many projects involving basic and applied research. The ICAI ARF believes that proper research inputs are necessary condition for raising the level of corporate governance, management, accounting and financial reporting. High quality research projects based on practical experience with theoretical extrapolations would also provide valuable inputs in formulation of policies and implementation thereof at macro and micro levels.

PERFORMANCE HIGHLIGHTS:

The ICAI ARF has completed another successful year, 2008-09, in establishing the Foundation as a core research body in the areas of Accounting, Auditing, Fiscal Laws and Policy, Corporate and Economic Laws and Policies, Economics, Financial Management, Financial Services, Capital and Money Markets and other related disciplines.

Recognizing the impetus required promoting quality research in the country; Board has adopted and pursued a multi - pronged action plan to support research projects of contemporary national and international significance in the areas related to accountancy profession. The ICAI ARF has extended an open invitation to undertake research to various institutions, research bodies, research scholars and the practitioners. Focussed advertisements were also put up on the website of ICAI ARF, and ICAI, and in the Journal of ICAI The Chartered Accountant, inviting expression of interest from the members and others to carryout research in the areas of contemporary interest with requisite financial support from ICAI ARF with an option of pursuing the research or for taking up of systematic study in relevant areas. As a consequence, during the year number of research projects has been commissioned, including those with bodies like IIM, Bangalore, Institute of Public Enterprises, Oxford University and other researchers.

New value added projects will continue to be the fundamental part of subsistence of ICAI ARF. Accordingly, projects that would add value and help in spreading, promoting and advancement of various disciplines in the fields of accountancy, auditing, fiscal laws and policy, corporate and economic laws and policies, economics, financial management, financial services, capital and money markets, management information and control systems and other allied fields are being undertaken.

RESEARCH PROJECTS:

The main objective of the establishment of ICAI ARF is to undertake, conduct, foster, promote and provide aid and facilities for prosecuting core, fundamental, empirical, applied and other kinds of research work, projects and studies. The research work undertaken by ICAI ARF has been divided amongst two branches of research, viz., (i) Basic Research, and (ii) Applied Research. The status of major projects completed during the year and presently under implementation under basic and applied research is given below along with particulars of proposals that are under consideration:

(I) BASIC RESEARCH:

Basic research is designed to add to an organized body of scientific knowledge and does not necessary produce results of immediate practical value. It is concerned with formulation of a theory or a contribution to theory. The ICAI ARF involves carrying out basic research projects pertaining to subjects requiring enquiring into problems and issues significant to accounting and auditing and allied disciplines such as economics, finance and business laws through outsourcing research projects by inviting applications from research bodies/scholars and providing them financial assistance. In view of the above, the following projects have been undertaken by ICAI ARF:

The following research projects undertaken earlier have successfully been completed:

• Study on Outcome Budget: The study was undertaken by the High Level Committee on Outcome Budget setup under the Chairmanship of Shri Suresh P. Prabhu, (former Member of Parliament) Director, ICAI ARF. The project was based on the study of the review of the structure, process, and format adopted for preparation of Outcome Budget by the Government of India. The final report of the project was presented to Shri P. Chidambaram, Honble Finance Minister of India on 25th July, 2008. The Finance Minister has assured that the suggestions contained in the report would be considered by the Government for making the Outcome Budget an effective tool for financial and programme accountability.

• Study of Fixed Income Securities Market in India by Dr. Vardaraj B. Bapat: The overall objectives of the project was to analyze the structure development and trends in various segments of Indian Fixed Income Securities Markets viz., Central and State Government Securities Markets, Municipal and Corporate Bond Markets and Markets for Treasury Bills (TBs), Certificate of Deposits (CDs) and Commercial Papers (CPs) in order to identify major issues and suggest policy measures. The final report of the project is under review.

The following research projects have been undertaken/continuing during the year:

• A High Level Committee has been setup to look into the aspects relating to Sustainability Reporting: The changing business environment has created an exigency to view sustainability reporting as an important aspect. Within this view, ICAI ARF has formed a Committee on Sustainability Reporting under Chairmanship of Shri Suresh P. Prabhu, to look into the various aspects of Sustainability Reporting. The Committee is in the process of suggesting a framework for Sustainability Reporting in India that would enable the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards goal of sustainable development. A sustainability report would provide an insight into various purposes, including:
• Benchmarking and assessing sustainability performance with respect to laws, norms, codes, performance standards and voluntary initiatives
• Demonstrating how organization influences and is influenced by expectations about sustainable development
• Comparing performance within an organization and between different organizations.

Thus, sustainability reporting is thus a vehicle to communicate with stakeholders on a companys economic, environmental and social management and performance.

• Developing a Code of Governance for Non-Profit Organisations (NPOs) by International Credit Rating Agency (ICRA): The research study primarily focuses on governance in NGOs and examines the following areas:
• Contextualization of the concept of corporate governance with common attributes of fairness, accountability and transparency;
• Emergence of NGOs as the predominant form of NPOs;
• Profile of NPOs in the country by number, type and activities;
• Legal framework governing NPO sector special emphasis relating to fiscal laws and foreign contributions;
• Key attributes of NPOs and their performance;
• Fund rising and its applications by NPOs;
• Corporate Governance structure models and their applicability to NPOs, and
• Model code of governance for NPOs.

• Impact of International Accounting Standards/ International Financial Reporting Standards on the wider stakeholders by Dr. Tomo Suzuki, Oxford University: The SAID Business School of the University of Oxford, London has taken up this project with the ICAI ARF. This research study aims to comprehensively evaluate the impacts of IAS/IFRS on the Indian accounting professions and the economy, so as to contribute to the establishment of India's strategy and policy formulation which may help in India converging with IFRS.

• Project on Economic Impact of Quarterly Reporting by Dr. R. Narayanaswamy, Professor, Indian Institute of Management, Bangalore: Dr. R. Narayanaswamy, Professor of the Indian Institute of Management Bangalore (IIM-B) has undertaken this project, under the aegis of the ICAI ARF, to investigate the economic impact of quarterly reporting with a view to re-evaluate the role of quarterly reporting. By providing evidence, the project results could influence policy formulation by SEBI and other agencies.

• A Study on Emerging Opportunities for Environmental Audit by Dr. Sureshramana Mayya: The overall objective of the project is to review the environmental audit, determine strengths and weakness of environmental auditing practices, assess the driving force for implementation of environmental audit, determine the role of internal auditors and to make recommendations and strategies to overcome weaknesses and barriers and strengthen driving forces to improve current auditing procedures.

• A Study on Valuation of Intangibles by CA. Shital Jhunjhunwala & Dr. R.K. Mishra, Institute of Public Enterprises: The project aims to study the current methods of valuing intangible assets, the disclosure requirements and to develop a method to value intangible assets of firms that would help investors take more informed and better investment decisions.

• A Study on Business Valuation by CA. Hozefa Natalwala: The project aims to study and to derive suitable purpose oriented method for valuation of the business. Also to popularize and disseminate the benefits of valuations and exposing the need areas. The project is planned to study the existing methods applied for valuing the business for various purposes and to suggest the purpose oriented suitable method.

• A Study of the processes employed by Indian Companies for encouraging creation of Intellectual Assets and fostering of thriving IPR Culture by CA. Rajesh R. Haldipur: The research project aims to investigate into the processes and practices followed by companies worldwide that have consistently built their IPR asset portfolios, to critically evaluate processes and practices followed by Indian companies in building a portfolio of IPR assets, to identify key factors as well as processes and practices influencing the success rate of creation of IPR assets and to enrich the literature on intellectual asset management in the Indian context.

• A study on Goods and Service Tax by CA. Prem T. Chattpar:: The aim of the research project is to study the production of research paper/publication that could be of help to the target group of beneficiaries, form the basis for Guidance Note for accounting for GST at the central and state level, and assist in the conduct of audits by members of the profession.

• A study on reforms in Insurance Sector by Ms. R. Kalyani, Mr. R. Navaneetha Krishnan and Mr. K. Jagadeesan (jointly): The research project aims to study about the private and public sector insurance services towards the policy holders, to analyze different policies towards public and private insurance sector, to study the socio-economic background of the policyholders and to offer suggestions to improve the policyholders satisfaction and to offer suggestion to introduce various new beneficial schemes to the policyholders.

The research studies on the following topics have been approved in principle by ICAI ARF subject to modification in methodology/scope for the research:

• • Special Economic Zone by Dr. M.Z. Farooqui: The research project aims to find out the elimination of domestic regulations, restrictions and infrastructure inadequacies in SEZ. The research also highlights the benefits derived from SEZ.
• • A study of efficiency, volatility and liquidity of derivatives market in India by Dr. P.K. Bandgar: The research project aims to evaluate and assess the financial market in respect of derivatives, to analyze the efficiency of the Indian derivatives market, to evaluate the volatility in the Indian Stock Market as well as in the commodity markets, to examine whether the implied volatility provides empirical evidence of existence of the relation with economy and FDI and to assess the need for convergence between the securities market and the commodities market.
• • A study of cartels vis--vis Joint Ventures, in view of the provisions of the Competition Act, 2002 by CA. Umesh Dixit: The aim of the research project is to study the behavior of the enterprises, to enter into anti-competitive practices by forming cartels. Also, to assess any probable loopholes, which might be utilized by the enterprises to evade the provisions of the law by forming, planned cartels under the grab of joint ventures.
• • Social Audit of Public Money: A study to formulate Social Audit Standards and Manual in Indian context by Shri Devendra Shukla: The aim of the research project is to conduct research study for developing Social Audit Standards and Manual, to collect secondary data in the field of social audit, to collect, classify and interpret primary data through organizing field research study in the field of social audit, to write final technical report incorporating recommendations of the research study and to develop Social Audit Standards and Manual.

(II) APPLIED RESEARCH:

Applied Research is directed towards the solution of immediate specific and practical problems. It is performed in relation to actual problems and under the conditions in which they are found in practice. The applied research requires systematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met.

In view of the above, ICAI ARF has undertaken projects related to conversion of accounts from cash basis to accrual system of Accounting for Municipal Corporation of Delhi, Kolkata Municipal Corporation involving conceptualizing a new accounting system including the incorporation of methodologies and procedures not current in India and same had been successfully completed. The Foundation has also undertaken DFID Project relating to Strengthening Rural Decentralization (SRD) suggesting a detailed methodology and road map for under pinning the issues on a logical framework. In continuation to above, the following projects have further been undertaken by ICAI ARF:

The following research projects undertaken earlier have been successfully completed:

• ICAI ARF Controller General of Accounts (CGA) Project on Introduction of Accrual Accounting: The project aimed at introduction of accrual system of accounting on pilot basis in identified units of Government of India, undertaken under the Memorandum of Understanding (MOU) between the Office of Controller General of Accounts (CGA), Government of India, and ICAI having a twinning arrangement with ICAI ARF. The project was funded by the World Bank. The final version of financial statements of five pilot units comprising of Dr. Ram Manahar Lohia Hospital and the four separate divisions of Central Public Works Department (CPWD) for the financial year 2006-07 following the accrual accounting along with Comprehensive Scope Evaluation Report, Chart of Accounts, Fixed Assets Register, Composite Guidance Document and Sustainability document has since been submitted to the office of CGA. The project has successfully been completed in September, 2008.

The following research projects have been undertaken during the year:

• ICAI ARF Department of Posts Project for implementation of Accrual system of accounting: ICAI ARF has recently taken up a pilot project for implementation of accrual accounting system in two primary postal units of the Department of Posts, one in urban area and one postal Unit in Rural Area under accounting jurisdiction of Pay & Account Office (PAO), Delhi which have been identified as pilot project, in respect of which an MoU along with Strategy Paper covering scope of work, costs, time schedule, resource commitments, terms and conditions etc. was signed on 24th June 2009 by the President, ICAI being the Chairman, ICAI ARF and JS cum FA of Department of Posts. Also, a Group of Facilitators (GoF) has been formed by ICAI ARF for the aforesaid project under the convenorship of the ICAI ARF Chairman. Further, a consultant team has been appointed by ICAI ARF comprising Team Leader, two junior consultants and others, who have initiated the project work from 8th June 2009 onwards.

To further promote the applied research, ICAI ARF is working on the lines of the aforesaid projects to undertake a new project for implementation of Accrual Accounting system in All India Institute of Medical Sciences, as given below:

• Proposal received from All India Institute of Medical Sciences (AIIMS) regarding preparation of Accounts as per new format of Accounts: The All India Institute of Medical Sciences, New Delhi has requested for professional assistance from ICAI ARF for conversion of its accounts from cash basis to accrual system of accounting and to work out the modalities for actual implementation as well as to assist the organization in capacity building.

FINANCIAL PERFORMANCE:

During the year the revenue from research activities has been Rs. 12.95 lakh as against Rs. 60.66 lakh in the previous year. During the previous year three projects, viz. KMC, CGA & DFID were completed and, therefore, income 60.66 was recognised in that year. The revenue surplus during the year was about Rs. 11.66 lakh as compared to about Rs. 70.69 lakh during the year 2007-08. A sum of Rs. 11 lakh has been appropriated towards the building reserve. Financial results for the year 2008-09 compared with those of previous year are summarized below:

(Amount in Rs.)

The ICAI ARF had acquired land from Jaipur Development Authority for setting up of University. An amount of Rs. 5,54,69,619/- was paid to Jaipur Development Authority by ICAI on behalf of ICAI ARF. The aforesaid project was later on dropped pursuant to the stand taken by the Ministry of Corporate Affairs, Government of India. Subsequently, the Government of Rajasthan had cancelled the land allotted to ICAI ARF for setting up of University and instead, allotted 25 acres of land to ICAI itself for setting up of Centre of Excellence at village Chosala, Tehsil Chaksu, District Jaipur at 50% of DLC rates. Accordingly, an amount of Rs. 2,84,19,519/- has been refunded by Jaipur Development Authority after adjusting Rs.70,00,100/- payable towards the land allotted to ICAI out of Rs.3,54,19,619/- paid towards the land earlier allotted to ICAI ARF. The balance amount of Rs.2 crore along with the interest accrued amounting to Rs. 39 lakhs was recoverable from Jaipur Development Authority as on 31st March 2009. In the month of June 2009, the amount of Rs.2.39 crore has been received from Jaipur Development Authority.

STRENGHTHENING OF INFRASTRUCTURAL BASE:
In order to strengthen the infrastructure base, ICAI ARF had taken an area of 20,000 sq. ft. in the Research Block, A-29, Sector-62, Noida, U.P. on sub-lease for a period of ten years from the Institute of Chartered Accountants of India on annual lease rental of Rs. 5,000/- along with Rs.5,00,00,000/- (Rs. 5 Crore only) payable towards the acquired built up space and the proportionate cost of construction, furniture and fixtures, installation and interiors thereof.

THE WAY FORWARD:

Recognising the fact that considerable efforts are required to promote research in the field of accounting in India, ICAI ARF has taken a number of proactive measures for undertaking applied research, and carrying out research studies. The ICAI ARF would further intensify promotional campaign for establishing direct contact with the Universities and other bodies on the one hand, and reaching out to the potential researchers throughout the country, on the other.

The list of proposed research projects of contemporary national and international significance and proposed research projects for PhD degree would be further expanded, and expression of interest invited. In selected 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 various stakeholders.

Initiative for applied research in newer areas including already initiated with the office Department of Posts on the lines of those taken up under MCD, KMC and CGA projects would also be considered, because they provide good base for applied research.

To further promote the applied research, ICAI ARF is working on the lines to undertake a new project for implementation of International Financial Reporting Standards (IFRS) in NHPC Limited.

To become a globally respected foundation that shapes research practices in India and abroad by creating new frontiers of knowledge, it is imperative that ICAI ARF is manned by research experts from the streams relevant to the accounting and allied professions. Research being the core function, the structure of ICAI ARF should revolve around the other functions providing support to this core function. Accordingly, a Vision Document has been prepared, wherein emphasis has been laid down on the future working of ICAI ARF and a re-defined structure for ICAI ARF has been finalized, divided into three separate divisions, namely,

• Research Department
• Accounts and Compliances Department
• Administrative Department

ICAI ARF aims to provide high quality academic and research results. Within this view, it is proposed that, renowned faculty would be appointed from within the country and possibly from abroad also, commensurate with other research bodies. The faculty would also undertake in-house research on subjects which are of importance to the accountancy profession or those referred to the ICAI ARF by the ICAI itself. The faculty would be involved in guiding the outside researchers, where required, throughout the period of the project with a view to ensure that the outcome of the result is of high quality.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND EXPENDITURE:

The foreign exchange outgo of 3000 GBP has been made on account of payment made to researcher under the project, namely, Impact of International Accounting Standards/ International Financial Reporting Standards on the wider stakeholders by Dr. Tomo Suzuki, Oxford University

Particulars of Employees: Pursuant to provisions of section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, it is stated that no employee was in receipt of remuneration exceeding Rs.24 lakhs per annum or Rs.2.00 lakhs per month during the year 2008-09.

DIRECTORS RESPONSIBILITY STATEMENT:

As required by section 217(2AA), Board of Directors hereby confirm that:

1. In the preparation of annual accounts applicable accounting standards have been followed with no material departure;

2. 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 2009 and of the income and expenditure of the Foundation for that period;

3. 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

4. We have prepared the annual accounts on a going concern basis.

INDUSTRIAL RELATIONS

The foundation has maintained the cordial and harmonious relations at all levels. Efforts were made to inculcate team spirit and motivate the employees to fully develop there potential.

HUMAN RESOURCE DEVELOPMENT

The Foundation has always considered that its core strength lie in quality of its human assets. Keeping in view the emerging needs for a competent and passionate leader, during the year 2008-09 in order to professionalise the executive strength, Dr. Avinash Chander was appointed as the Dean cum - Director of the foundation.

STAFF WELFARE

Welfare of the employees had received due attention during the year.

BOARD OF DIRECTORS

During the year CA. Ved Jain relinquished the charge of Chairman held by him as Ex-Officio. The Board places on record its appreciation for the commendable services and contribution made by CA. Ved Jain.

STATUTORY AUDITORS

M/s. Bubber Jindal & Company Chartered Accountants, retire as Auditors at the conclusion of this Annual General Meeting. The Board places on record its appreciation for the services and co-operation received from the Auditors.

ACKNOWLEDGEMENT

The Board take this opportunity to place on record their appreciation for the continued assistance, support and co-operation received from the Ministry of Corporate Affairs- Government of India, State Governments and their Urban Local Bodies, M/s. Infosys Technologies Ltd, Office of Controller General of Accounts (CGA), Government of India, Department of Posts, Government of India, Guru Gobind Singh Indraprastha University, Bank of India and other authorities, experts, research scholars and individuals during the course of execution of the research projects and in other disciplines. The Board also placed on record their appreciation for the sincere efforts of Senior Advocate Shri N.K. Poddar along with Advocate Shri Pramod Dayal for successfully representing the case on behalf of ICAI ARF before Delhi High Court for allowing exemption u/s 10(23c)(iv) of the Income Tax Act, 1961 and CA. Shyam Lal Agarwal for providing continued assistance for the realization of Rs.2.39 crore from Jaipur Development Authority

The Board of Directors sincerely appreciate and commend the valuable contribution made by the employees of the foundation at all levels in the pursuit of achieving excellent result for another year in succession.