27th March

Moratorium on MTM

The article talks about the recent suspension of reporting of exchange rate related losses on forward contracts for 2 years ordered by National Advisory Committee on Accounting Standards. However, author argues the major flaws associated with the decision and demands rigorous debate over the issue.

The decision comes as a relief to corporates who have been reporting major losses on forex hedges since rupee depreciated over 20% last year and 4% in the current year. This could create a lot of difficulties for companies that are credit-starved and wants to raise funds. The decision seems fair since these are temporarily losses and once the market recovers, the rupee appreciation would increase the value of these assets back to normal. However, it should be noted that the same rule also helped the corporates to report inflated profits at the time when rupee was highly appreciated. MTM rule depicts the true picture of a company at any given point and worth of the company if it is to be liquidated immediately. This is very important information for shareholders and investors. Instead of suspension, corporates should be asked to report two sets of P&L numbers, one with MTM values and one without it. If not that, then at least they should report the key financial numbers where the rule can be applied. Also the MTM rule applies to the assets/liabilities of a corporate and so MTM should also be accounted in the balance sheets and not in P&L accounts. 

Thus, corporates should also produce set of asset-liability statement every quarter to inform shareholders about the corporate wealth. 

Tall promises as usual

The article talks about the season of tall promises that has flourished as elections come near and every party is busy with its election manifesto. However, less fulfilled then made, these promises only highlight the populist and politically correct schemes. 

This time, election manifestos are more focused towards populism or pro-aam aadmi debate given the current economic conditions. While Congress plays up with NREGS and basic food security schemes, BJP is also expected to play on the similar lines. As per Congress, the basic food security scheme would ensure a certain quantity of rice or wheat to every person below poverty line while NREGS would be extended to provide 100 days employment for a family to each individual. However, such extravaganza often invites claims of fiscal indiscipline further compounded by flawed PDS. With efforts to improve and streamline latter, PDS would continue to perform better in southern states. Besides populist measures there are promises on national security. While CPM promises to revoke the nuclear deal, if comes to power, BJP is expected to retell few the key Hindutva agendas. Empowering minority classes and other disadvantaged section forms the theme for Congress. 

However, such measures would only yield results if democracy is seen as centre to the issues of development and participatory politics.

Saurav and Aussie coaches

The author wonders why there is such a furor over removal of Saurav as a captain of KKR in the coming IPL. While T20 is considered youngsters game, it should also be led by young blood.

Had IPL-2 be played in India, Eden Gardens would have been crowded with ardent Saurav fans burning the posters of John Buchanan over his decision to remove Dada from captaincy just like they did it 40 months back for Greg Chappell, said Boria Mazumdar on Times NOW. While rest of India would have wondered on this, especially when the winning trio of Sachin, Saurav and Rahul opted out of T20 World Cup which India won in 2007, removal of Rahul Dravid as Bangalore Royal Challengers’ captain hardly invited any such reaction. So what is so special about Saurav and KKR? Why is it hard to believe that the removal has been done in good faith? Neither BRC nor KKR did well in the inaugural IPL under the captaincy of Rahul and Saurav. 

True, KKR might lose a huge fan base in absence of Dada but fan base cannot preempt performance especially when Buchanan can boast of two emphatic ODI World Cup wins for Australia in 1999 and 2003.