Vikas Dhoot New Delhi: Within four days of the controversial December 16 meeting of the Satyam Computer Services board, which approved the subsequently aborted plan to buy the two Maytas firms promoted by founder Ramalinga Raju's two sons, the ministry of company affairs ordered a probe by the Registrar of Companies (RoC) into the IT company's accounts. Though the probe's mandate expanded after Raju's confessions of fraud in the first week of January, the RoC wrapped up its probe by January 13.
While foreign investors have become wary of India Inc's accounting practices, a much larger probe ordered by the ministry into levels of compliance with Accounting Standard (AS) 11 in November is yet to be complete. AS 11 requires firms to make mark-to-market provisions in their profit & loss accounts on account of fluctuations in foreign exchange rates. "The investigation is still on. We are looking at 30 companies," a senior government official said. The probe was ordered at the end of the second quarter results season as companies sought to limit the impact on their bottomlines of the rupee's slide against the US dollar in 2008. Though third-quarter results have now started pouring in, the probe clearly hasn't progressed at the speed of the Satyam case. The rupee slid from around Rs 40 to a dollar to around Rs 50 by September 2008, and closed at Rs 49.18 on January 20. Accounting for forex transactions on a mark-to-market basis was particularly painful for companies already seeing slowing business growth. So, in order to avoid AS 11 compliance, several firms sought refuge under a quaint clause (Schedule VI) of the 1956 Companies Act, which allows foreign exchange fluctuations to be adjusted in the cost of fixed assets, for which foreign currency loans were raised. While companies claimed to be doing this on the basis of sound legal advice, it essentially meant they were inflating profits. At the time, company affairs minister Prem Chand Gupta had told FE this was tantamount to window-dressing accounts, and ordered a probe by RoC's field offices. "Though there may be a seeming contradiction between AS 11 and Schedule VI, Section 211 of the Companies Act makes it very clear that companies are bound to follow AS 11. The AS takes precedence over Schedule VI," Gupta had said. http://www.financialexpress.com:80/news/30-firms-under-ministrys-as-11-investigation/413305/ ekamber --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
