To: The Editor
Published: Asian Voice
Date: 1st October 2008
From: Nagin Khajuria FCCA
I do not agree with your headline article “World markets on roller coaster, India sits pretty” (AV, Vol 37, Issue 21, 27 Sept, p1). Indian banks and Indian business have followed herd of G8 nations for too long. They now need to expand deeper into non G8 nations economies, learn other key foreign languages and their business models. The demand from G8 nations is likely to go down for Indian exports. That happened during the Asian crisis in 1997. That was a puncture in the tyre. This is engine failure.
Current events remind me of the proverb: “You can fool some of the people all of the time, all of the people some of the time, but you cannot fool all of the people all of the time.”
Some examples are:
The word “opinion” in Audit Report is fundamentally flawed. It should be “assurance”. Annual reports run into 300+ pages and are impossible to understand by shareholders. It turns out they were useless.
During the quarter ended 30 June 2008, 120 Indian companies set aside RS 8,900 crore for currency fluctuations, exotic derivative products and mark-to-market losses to hedge their exports. Surely, historical accounting is the way forward with any changes in market values (that move up and down 100% every year) to be stated by way of a note only. IFRSs need to be restructured.
By changing interest rates too frequently, central banks and their political masters have knowingly or unknowingly given wrong signals to the market economy. A culture of minute-by-minute speculation in all these products is being nurtured all the time through advanced information technology and communications.
The world financial crisis is blamed on sub-prime mortgages and very little has been said about the hyper activity of mergers and acquisitions, re-invented by private investment banks during the past 25 years with disproportionate level of debt finance as opposed to equity finance as publicly quoted company board of directors became poorer managers.
All these years a belief has been rammed down our throats that private sector is “efficient” and public sector is “inefficient”.
As a shareholder of Vodafone plc, I was able to get into their official website two years before Arun Sarin became CEO. The Balance Sheet had an asset value of £100 billion pounds that included goodwill value of £30 billion.
Based upon my understanding from the accounts, of the company’s future prospects, I sent an email to the Vodafone and the Accountancy Age Letter to the Editor, stating that the Auditor was wrong in signing off the Balance Sheet and justifying keeping the goodwill value on the Balance Sheet based on the next 10 years revenue stream forecast in Note 1.
My letter was not published. Arun Sarin became the CEO two years later and wrote off £28 billion goodwill in the following year.
Finally, as a policy holder in Standard Life, I was strongly opposed to the concept of demutualisation. Mutual building society concept is a business model India should adopt for India’s housing boom.
Director, Simplification Made Simple Limited
Chartered Certified Accountants & Registered Auditors
W: www.c-o-t-m.com
E: info@c-o-t-m.com
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