GAAP puts RIL in better light

For the first time Reliance Industries has presented a statement reconciling its annual accounts prepared under Indian GAAP (as is normally ...

For the first time Reliance Industries has presented a statement reconciling its annual accounts prepared under Indian GAAP (as is normally reported) with those prepared under US GAAP and the International Accounting Standards (IAS), and is the first Indian manufacturing company to undertake such a reconciliation as part of its routine reporting to shareholders. This move from Reliance was both known and expected. But what was unexpected and which came as a pleasant surprise was the fact that there was no major discrepancy between the accounting standards adopted by the company under Indian GAAP and that under the US GAAP and the IAS. This is very much contrary to what the popular perception of the company’s accounting policies are. In fact under US GAAP the net income has reduced by a meagre Rs 81 crore from the Rs 1,653 reported under Indian GAAP for 1997-98 to Rs 1,572 crore. While under the IAS the Reliance profit is lower by Rs 151 crore at Rs 1,505 crore as compared to that under Indian GAAP. The reasonthere is a difference between the two foreign standards is because of the differential treatment given to certain aspects of consolidation of subsidiaries accounts. While both accounting standards use the equity method of accounting (Indian GAAP does not require consolidation of accounts) the standards under the IAS are a bit more stringent in the sense that it does not recognise the profit on re-valuation of securities held by these companies, hence while the consolidation of net income of its subsidiaries yielded a higher income of Rs 53 crore under US GAAP that figure under the IAS yielded a loss of Rs 7 crore.

But the bulk of the difference between the reported profit and the re-computed profit is because of the provision for deferred income taxes.

These provisions arise mainly due to the conservative nature of accounting for expenses incurred while setting up new projects, under the foreign standards, where unlike under Indian standards capitalisation is not allowed. The treatment may eventuallylead to higher tax provisions resulting from these transactions and so a provision needs to be made, which amounted to Rs 117 crore.

Corporation Bank: Bucking the trend

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While the banking sector as a whole has performed in line with the Sensex in the last six months, in the last week or so the performance of various bank stocks has been debilitating, leading to a lot of confusion about the status of the banks vis a vis their expected profitability as well as the impact of the budget on these stocks. The leading banks in particular were badly hit.

But in the last one or two days there have been some positive signals. First of all given the level of FII holding in the top PSU banks it is a natural corollary that with the level of FII sales in the market (gross sales have crossed Rs 100 crore in each of the last four days) these banks would be hit. With FII sales likely to slow down in the next few days the bloodbath is likely to halt as well. Corporation Bank in particular proved to be veryattractive to operators and funds alike with the stock actually being a sole gainer in the entire specified list on Friday, given that the stock has crashed from Rs 151 to Rs 105 in the last six weeks. The stock gained by three per cent while the market slid by the same percentage.

No matter what contingency is factored into the valuations of bank stocks, Corporation Bank’s underlying strengths more than compensate. The bank has a present risk weighed capital adequacy of 17 per cent, a return on networth of (after expansion in the equity) of 20 per cent and a return on average networth of 1.87 per cent. The operating costs of 2.6 per cent of average funds is high but then average for Indian public sector banks is 3 per cent.

And in any case the Narasimham Committee norms for the banking sector are five years away from being fully implemented by which time the bank will be in a stronger position. Even at present it is the only bank amongst the public sector banks that marks 100 per cent of its portfolioto market.

H-1B $100,000 entry fee explained: Who pays, who’s exempt, and what’s still unclear?

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The White House's decision to impose a $100,000 entry fee on H-1B visa holders has sparked worry among Indian tech workers and students. While uncertainties remain about its implementation and exemptions, major tech companies have cautioned employees against traveling. The policy could lead to a shift towards other visa categories and potentially change the STEM immigration pipeline.

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