Consultants Corner Volume 5 | Number 69 | May 2012 | Page 1– 12

NCR Consultants Limited www.ncrcl.com

Associates with

AS 14:Accounting For Amalgamations

Page. 04

Lakshminarayanan M N

Handling QDQU Page. 03

Homage

Suresh R (24th November, 1984 to 5th May, 2012)

All of us at NCRCL deeply mourn the demise of our colleague Suresh. Suresh

popularly called ‘Suri’ joined NCRCL in April, 2003 in our BBMP project office

and was on duty when he passed away due to a heart attack. Apart from his

dedication to work, we remember Suri for his good sense of humour and

friendly nature. Images of his role in ‘Sri Krishna Sandhana’, a play staged by

NCRCL staff will never leave us and keep reminding us of his personality.

We pray for his soul to rest in peace.

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

The basic issue in corporate India is the lack of job fit. What educational

qualifications prepare the students for and what the industry needs seem to be

totally different. In recent times, this difference has been increasing as students

do not even possess soft skills and learning attitude at work. This has to

change.

I understand that the software bigwigs now recruit students from three year

programmes like B.Sc, B.Com and train them in-house before placing them on

the job. Engineering graduates are no more considered very suitable for the

software companies. The himalayan blunder in engineering courses has been expanding the quantity without any

concern for quality. Actually, if India had created even 25% of these institutions in the caliber of IITs then we would have

ruled the world. Slowly India is losing out in the IT sector. Apart from these qualitative issues, the cost of Indian

employees has also become very high that we are no more price beneficial to the clients. So we have a set of people

who are costly and cannot deliver!

This quality down-quantity up (QDQU) syndrome has caught up with the MBA course

also. We have thousands of institutions offering MBA programmes without any quality

whatsoever. Students without screening are admitted for the sake of fees and very low

quality programme is offered to them often with negative value additions making the

students totally unemployable!

No one seems to be bothered about this issue and the impact it has on the economy and

the country as a whole. India was known for its Mathematics and English skills. These are

now going down slowly. It is sad to note that the

attitude of the parents and the students are alike.

They do not want to learn and work for success. They feel that just the completion

of a course entails them with best things in life. This attitude of Indians, when

compared with the situation in countries like China, Brazil and even some of the

CIS countries is very depressing.

China is introducing interesting programmes that are oriented towards the

industry and research, apart from drastically improving the English skills of their

students. Innovative teaching methods and state of the art technology is used in

education. The industry is also aware of what is required and accordingly

provides feedback to the educational institutions. In India, the moment a person

gets the degree he wants he stops studying (meaning upgrading himself). In the

case of practicing professions like advocacy and accounting, the practitioners,

utmost try to understand the amendments in statutes relevant to them; they have

no idea of the technology that influences their practice, the latest concepts that

are being researched, and also the changing global market/behavioural

scenarios.

Thus we see not only in education, but also in work the updating and industry

orientation seem to be totally lacking. This QDQU need to be tackled immediately

and is no more an issue for the educational institutions alone. The stakeholders

from the demand side of the issue need to get involved and this means all of us.

We need to play a major role in handling QDQU issues. But how? Let us discuss.

Please mail your ideas….

3 Message from Dr. RSM

4 AS 14:Accounting For Amalgamations

5 Environmental Management Accounting (EMA)

7 How much should we do?

7 Feedback

8 What’s up at NCRCL?

9 An Exclusive Talk

10 Parichay

11 Knowledge Snippet

11 Birthday Greetings

11 Just for Laughs

11 Round Table

Inside

Handling QDQU

Dr.R.S. Murali

muralirs@ncrcl.com

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

We can chart our future clearly and

wisely only when we know the path

which has led to the present.

-Adlai E. Stevenson

Introduction: The accounting terminology of

‘Amalgamation’ is derived from the term ‘Amalgam’

which means to unite. In corporate environments also

two entities unite and form a single entity.

Important Terms

Transferor Company: Company which is

amalgamated into another company.

Transferee Company: Company into which

Transferor Company would amalgam.

Types and Method of Accounting

In general, there are two types of amalgamation and

method of accounting, they are:

Amalgamation in nature of merger

1. In the event of two entities coming together. If all

five conditions stated in AS 14 are fulfilled it is

treated as amalgamation in nature of merger. The

conditions are as follows:

2. All the assets and liabilities of the transferor

company become the assets and liabilities of the

transferee company.

3. Shareholders of the transferor company holding not

less than 90% of the face value of equity shares

become the shareholders of transferee company by

virtue of amalgamation.

4. Consideration made to equity shareholders of

transferor company is in the form of equity shares in

the transferee company, except in case of fractional

shares cash can be paid.

5. The business of the transferor company is intended

to be carried on by the transferee company even

after amalgamation.

6. Assets and liabilities of the transferor company are

incorporated in the books of the transferee company

at book value except to ensure uniform accounting

policies.

Pooling of Interest method

1. In preparing financial statements of the transferee

company, assets, liabilities and reserves of the

transferor company should be recorded as existing

carrying amounts and in the same form at the date

of amalgamation, balance of the profit and loss

account of the transferor company should be

aggregated with the corresponding balance of the

transferee company or transferred to general

reserve if any.

2. If at the time of amalgamation the accounting policies followed by the transferor company and transferee company are in conflict, it should be resolved, and brought in line with the policies of the transferee company.

3. T he d i f f e re nce between the amount recorded in share capital issued and the amount of share capital issued by the transferor company should be adjusted in reserves, however in some cases courts may stipulate the manner in which the reserves should be adjusted.

Amalgamation in nature of purchase

What is not a merger is a purchase.

Purchase method

In purchase method accounting for amalgamation is done by applying same principles used in accounting for normal purchase of assets. Some of the rules adopted are the following.

1. The Assets and liabilities (not reserves) of the transferor company are incorporated in the books of transferee company at the existing amounts. Alternatively, the purchase consideration should be allocated individual identified Assets and liabilities on the basis of their fair values at the date of amalgamation.

2. Non statutory reserves of the transferor company are not included in the financial statements of the transferee company.

3. If purchase consideration > net assets, the difference is debited to the good will account. If purchase consideration < net assets, the difference is credited to the capital reserve account.

AS 14:Accounting For

Amalgamations

Lakshminarayanan M N

lakshmi.n@ncrcl.com

Nature of Amalgamation Method of Accounting

Merger Pooling of Interest method

Purchase Purchase method

Cont on next page

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

4. The goodwill arising on amalgamation should be

amortized to income over the five useful life.

however if some what a longer period is justifiable

the period of amortization can be extended.

5. Where the requirements of the relevant statute so

demands, statutory reserves should be recorded in

the financial statement of the transferee company.

(credit statutory reserves, debit ‘Amalgamation

adjustment account’). When legal requirements no

longer warrants maintenance of such reserve a

reverse entry is passed. The Amalgamation

adjustment account should be disclosed in the bal-

ance sheet under the heading ‘Miscellaneous

Expenditure’.

Areas Having Linkage

Non cash consideration

If consideration paid to transferor company, include

securities or non cash items. Four aspects have to be

kept in mind.

Non cash component must be valued at fair value.

In case of securities, the value fixed by the

statutory authorities have to be taken as fair value.

If other Assets are handed over their market value

is taken as fair value.

If market value are not ascertainable then the net

book values are taken as fair value.

Adjustment of consideration – Future events

A purchase or merger transaction can take place on

terms and conditions which may include an element of

consideration payable on a subsequent date which may

depend on one or more events materializing, two

possibilities may arise.

Such a condition payment if probable and amount

can also be estimated then the amount should be

included in the consideration.

In all other cases, it must be recognized as soon

as the amount is determinable.

Treatment of reserves if specified in the scheme of

amalgamation

In some cases, the court may specify certain conditions

pertaining to ‘treatment of reserves’ of transferor

company, then such conditions should be followed. If

such conditions as laid down by the court is different

from those of AS 14, then the following additional

disclosures is to be made.

Description of accounting treatment given.

Reasons for following such treatment.

Deviations in accounting treatment given to

reserves sanctioned under the statue as

compared to AS 14 that would have been

followed, had no treatment been prescribed by the

court.

Disclosure Requirements

1. For all amalgamations

a. Names, nature of business of amalgamating

companies and Effective date of amalgamation.

b. Method of accounting

c. Particulars of scheme –statutorily sanctioned

d. Amalgamation after B/S date but before issue of

financial statements disclose as per AS 4 – but

not be incorporated in financial statements.

2. For Pooling of interest -1st

Financial Statement

a. Description and nature of shares issued.

b. Percentage of equity shares exchanged to give

effect to amalgamation.

c. Difference between consideration and NAV

treatment.

3. For Purchase method-1st

Financial Statement

a. Consideration paid and contingently payable.

b. Difference between consideration and NAV

treatment.

c. Amortization period of goodwill if any.

Stories can conquer fear, you know. They can make the heart bigger.

- Ben Okri

Need for EMA

Many organizations are now aware of the environmental

implications of their operations, products or services on

the society which are important for long term survival

and profitability of the organization. By reducing the

negative impacts of its operations, products or services,

the potential benefits that flow to the organizations are

as follows.

1. Ensures the organizations meet with legal and

regulatory requirements

2. Increases sales by meeting the customers’ needs

3. Helps to create & maintain a positive public image

Environmental Management

Accounting (EMA)

Babu Rajendra Prasad

babu.p@ncrcl.com

contd on next page

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

4. Helps in managing environment risk

5. Reduces environmental costs through improved use

of fuel, water etc

Deficiency in Traditional Accounting Systems

In Traditional Accounting Systems, costs related to

environment like waste management, pollution control,

decommissioning etc are grouped under the general

overheads and so organizations do not have any

information on those costs to manage or reduce the

environmental impacts. In order to overcome these

deficiencies, Environmental Management Accounting

was introduced.

E n v i r o n m e n t a l

Management Accounting

The purpose of EMA is to

take in to account the

e n v i r o n m e n t a l c o s t s

associated with all aspects

of operations, products or

services. The aim of EMA is

to provide financial and non

financial information about

the environment costs in

s u c h a w a y t h e

management can make

better decisions about products and projects and so

better manage their overall environmental performance.

EMA breaks down environmental costs into five

categories:

1. Conventional Costs: Raw materials, utilities, labour

and capital costs are conventional costs always

considered in project appraisals and cost

accounting, however the environmental portion of

these costs, e.g. non-product raw material costs, are

not isolated and recognized as environmental.

2. Administrative costs: Costs are buried in the

overhead costs and hidden. Examples include

monitoring, reporting or training costs.

3. Contingency costs: Costs that may or may not be

incurred in the future, such as potential clean-up

costs from an accident, compensations or fines: the

inherent difficulty in predicting their likelihood,

magnitude or timing often results in their omission

from the costing process. However, these costs very

often represent a major business risk for the

company.

4. Image benefits and costs: These costs often called

as intangible or “good-will" benefits and costs arise

from the improved or impaired perception of

stakeholders (environmentalists, regulators, custom-

ers, etc.). Changes in these intangible benefits are

often not felt until they are impaired.

For example, a bad relationship with regulators may

result in prolonged licensing process or stricter

monitoring.

5. External costs represent a cost to external

stakeholders (communities, customers, etc.) rather

than to the company itself. The company should be

aware, however, that high levels of external costs

may eventually become internalized through stricter

environmental regulation, taxes or fees.

Types of Information

EMA can collect two types of information to provide as

information to management for making decisions.

1. Physical data – On the use of

materials & resources

2. Monetary information – On the

financial costs and revenues &

potential savings

EMA Techniques

EMA techniques like Environmental

ABC, Life Cycle Costing, Input –

Output Analysis etc gathers the

a c c o u n t i n g i n f o r m a t i o n o f

environment costs related to specific

activities, processes, products or services.

Benefits to Organization

EMA is concerned with accounting information needs of

an organization in relation to corporate activities that

affect the environment as well as environment – related

impacts on the company. EMA enables the company:

To identify & estimate the costs of environment

related activities

To identify & monitor the usage & cost of resources

such as water, fuel etc and to reduce costs

To ensure environment contributions form part of

capital investment decisions and new product

developments

To assess the likelihood & impact of environment

risks

To ensure routine performance monitoring includes

environment related indicators & benchmark

activities against environmental best practice.

Reference

1. UNDSD: “Environmental Management Accounting, Procedures

and Principles”, United Nations, New York, 2001

The more you give, the more you live,

and it's never too early to start.

-Blake Mycoskie

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

Look deep into nature, and then you will under-

stand everything better.

- Albert Einstein

Thought to ponder...

In office, at home, in life we face situations where we are

tempted to do beyond our brief… with good intentions of

course, but our good intentions sometimes boomerang

much to our dismay. Lesson learnt, we may be content

doing just what is expected of us… and then we are

pulled up … for not showing initiative, to go beyond our

call of duty. How can we differentiate or draw the fine

line between being ticked off or appreciated; being

pro-active and not reactive. Nevertheless, I have

personally believed and lived by what Desmond Hill said

in Law of Success - work more than what you are paid

for. This means, be pro-active and exceed your brief.

Here again, choice is yours.

Now read on…………

==========================================

There was once a washer man who had a donkey and a

dog. One night when the whole world was sleeping, a

thief broke into the house, the washer man was fast

asleep too but the donkey and the dog were awake.

The dog decided not to bark since the master did not

take good care of him and wanted to teach him a lesson.

The donkey got worried and said to the dog that if he

doesn't bark, the donkey will have to do something

himself. The dog did not change his mind and the

donkey started braying loudly.

Hearing the donkey bray, the thief ran away, the master

woke up and started beating the donkey for braying in

the middle of the night for no reason.

Moral of the story: "One must not engage in duties

other than his own"

==========================================

Now take a new look at the same story...

The washer man was a well educated man from a

premier management institute.

He had the ability of

looking at the bigger

picture and thinking out

of the box. He was

convinced that there

must be some reason

for the donkey to bray

in the night.. He walked

outside a little and did

some fact finding,

applied a bottom up approach, figured out from the

ground realities that there was a thief who broke in and

the donkey only wanted to alert him about it.

Looking at the donkey's extra initiative and going

beyond the call of the duty, he rewarded him with lot of

hay and other perks and became his favorite pet.

The dog's life didn't change much, except that now the

donkey was more motivated in doing the dog's duties as

well. In the annual appraisal, the dog managed

"ME" (Met Expectations) .

Soon the dog realized that the donkey is taking care of

his duties and he can enjoy his life sleeping and lazing

around. The donkey was rated as "star performer". The

donkey had to live up to his already high performance

standards.

Soon he was over burdened with work and always under

pressure and now is looking for a NEW JOB ... !!!!

(Source: Internet)

How much should we do?

-Rekha Murali

rekha@ncrcl.com

CC looks stylish! Kudos to CC team!! - Bhavana

The New look CC is amazing. Especially the exclusive talk page is superb. it is as good as the TV program walk the talk..Keep it up.. congrats.. - Ravikrishnan

It’s come out very well. - Kishore

The new look is quite impressive and colourful! Hope we get in more and more original articles and add quality to the readers. - Suresh C S

While our CC has 12 colourful and well designed pages, effectively there are articles for only 5 pages. Effort should be made to improve this ratio and have at least 7 to 8 pages of worthwhile articles for our readers. - Suresh C S

New look is super! - Balaji (Office Assistant)

The new look CC looks great. Congrats on a job well done!! - Ashok Rao

Good job!! CC looks awesome. Looks professional and innovative. - Sowmya

Feedback

There were a number of responses to the new Avatar of the Consultants Corner which are featured above. Thank you

for your enthusiastic and encouraging feedback! We appreciate your support to help us do better. - Editorial Team

What’s up at NCRCL?

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

The most important lessons in life can never be expressed in black and white, but must be experienced. Experience is the greatest teacher.

- Benny Lewis

Gopal Agarwal, CA, joins

NCRCL® Bangalore.

Welcome!!

We extend a very warm welcome to Gopal and Krithiga!

R Krithiga Priyadharsini,

CA, jo ins NCRCL®

Chennai.

Babu Rajendra Prasad conducted a two day study circle on

Balanced Score Card. The initiative was well received by the

NCRCL team with whole hearted participation. The first day’s

session covered the theoretical aspects of Balanced score card

with corporate examples. The second day was action packed for

the participants with a case study. The Case study was based

on a Greek Tobacco Manufacturing Company. The participants

were divided into four teams with team members selecting a

name for their team. Each team was then asked to prepare a

balanced score card on a relevant area for the company. A

member of the team was then asked to present it to the larger

group for discussion and validation. The presentations were

conducted during the major part of the day after team

discussions. Kudos to Babu for the well planned initiative and we

hope to see more such workshops at NCRCL!

C S Suresh attended a seminar on

Business Opportunities with ADB at

Hyderabad on 24th April 2012.

Our Chennai office celebrated “Ethnic Day”

on Saturday, April 21, 2012. The team

members came sportingly dressed in

traditional attire to office. The men wore

Dhotis with Kurta/Shirt and the women

presented a pretty picture in colourful sarees

and the customary “mallipoo” (jasmine

flowers). The enthusiasm and gaiety was

palpable through the day and the icing on

the cake was the birthday celebrations of

Lakshminarayanan. The day was filled with

both an element of fun and intense learning.

Ashok Rao &

Padmaja visited

Mangalore for TP

Project

“Are social networking sites generally

beneficial to our world” was the topic of a

heated debate at our Chennai office,

organised by Pradeep on 25th April,

judged by C S Suresh with Kishore as

the moderator. The result was however

neutral.

An Exclusive Talk with Gopal

Gopal Agarwal CA , B.Com. Working as Consultant Trainee Born on 17th February Email: gopal@ncrcl.com Mob No: +91 8892621806

CC. The meaning of your name.

Gopal: Gopal is the Child form of Lord Krishna.

CC. Nickname.

Gopal: Goops

CC. Your dream job.

Gopal: Be a successful Businessman

CC Your first impression of NCRCL.

Gopal: Knowledge and professionalism

CC. What personal/emotional characteristic of yours do you want to change?

Gopal: Anger

CC. Money or job satisfaction?

Gopal: First priority Job Satisfaction.

CC. Your Stress buster.

Gopal: Previously it was Internet Surfing, Now it’s REIKI

CC. Do you have a small circle of close friends, rather than a large number of friends?

Gopal: I have both types of friends

CC. What do you most like about a person?

Gopal: Knowledge and simplicity

CC. What do you most hate in a person?

Gopal: Dual policy (andre se kuch, bahar se kuch)

CC. Team work vs Individual work – your com-ments.

Gopal: Depends.

CC. Do you make efforts to get others to laugh and smile?

Gopal: Yeah. Whenever I get the chance, I make efforts to get others to smile.

CC. Your heart rules your head or your head rules your heart?

Gopal: When things are related to emotions, my heart rules my head and when things are related to responsibility, my head rules my heart.

CC. What kind of special talent do you have?

Gopal: I can easily understand new things

CC. What are your hobbies?

Gopal: Chess, Travelling

3 4 5 6 7 8 1 2 12 11 9 10 Consultants’ Corner

Wisdom is knowing what to do next,

skill is knowing how to do it, and virtue

is doing it.

- David Starr Jordan

Parichay Know our Associates!

Fichtner India

FICHTNER INDIA, an ISO:9001:2000 company certified by TUV India, is one of the leading

Engineering Consultancy firms in India providing comprehensive engineering solutions for a wide

range of services in the:

Utility & Industrial Power Projects – based on subcritical and supercritical technology

Desalination Plants

Water & Infrastructure Projects

FICHTNER INDIA also provides complete range of engineering consultancy services, with the

support of FICHTNER GERMANY in Solar Power Projects in India based on modern technology.

FICHTNER INDIA, Incorporated in the year 1987 as a joint venture, is today a wholly owned

subsidiary company of FICHTNER GmbH & Co. KG, Stuttgart, Germany, and has grown into a

leading multidisciplinary engineering consultancy firm. It has its head office in Chennai and has

branch offices at Mumbai and Bengaluru.

NCRCL® and FICHTNER INDIA have entered into a long term contractual agreement to work

together on a prestigious project with Karnataka Urban Infrastructure Development and Finance

Corporation (KUIDFC) over the last two years. NCRCL has provided the services of Information

Management Specialist and Financial Management Expert to work with the Project Management

Unit of the World Bank assisted Karnataka Municipal Reforms Project (KMRP).

Answer To last month’s Knowledge Snippet question:

Which is the river which carries maximum quantity of water into the sea?

Answer: Amazon River. It is in Brazil

Ha Ha Ha !!!

Knowledge Snippet

The right answer was given by

R Bhavana

!!! Congratulations !!!

Happy Birthday!

Round Table

Which is the country known as the Sugar Bowl of the

world?

Send in your answers to the editor at cc@ncrcl.com

3 4 5 6 7 8 1 2 12 11 9 10 Consultants Corner

What you are is what you have been. What you'll be is what you do now.

- Buddha

Suggestions galore from our colleagues on the changes they would like to see at NCRCL! We

can get together for a discussion on how to take these suggestions forward! - Editorial Team

For feedback

If you have any comment/suggestion for the

editors, please write to us at cc@ncrcl.com! Your

views and comments on articles featured here

are also welcome!

Balaji.G - 25th May

I would like to have a more spacious office for NCRCL Bangalore with a separate room for discussion

- Ashok

I would like to see a bright and fit team at NCRCL. What better way than to start a group yoga session twice or thrice a

week! This would lead to a more cohesive and energised team. Also uplift each one of us spiritually leading to benefit of

the Organisation. This can be done either before or after office hours. - Rekha

Let us have a knowledge sharing session during the tea break (every alternate day at least). The session should not last

for more than 5-7 minutes followed by a few mins of Q&A/discussion. New concepts and ideas relating to our area of

work can be discussed at the library table. Topics may be from areas such as Finance, Process, IT, HR, General

Management etc. These can go in as a half-page article for that month's CC - Kishore

Over the last year or so we have been dedicating one full page for "Our Business Associates" and filling it up with

colourful logos. How many of the NCRCL employees know these associates, what they do and who are the people

behind these entities? It would be nice if we can organise key members of the associates to come and address us (with

video conference with Blore) or in some cases, have an internal briefing about them.—C S Suresh

Our Business Associates

NCR & Co Chartered Accountants www.deltacadd.com

www.f1secure.com www.nathaninc.com

www.hsbconsulting.biz www.obsitech.com

www.altacit.com

www.fichtner.in/india.htm

www.4spl.biz

www.ineval.org

www.fugoconsulting.com

Karnataka Institute of Public Auditors www.mcmillanwoods.com

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