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INTEGRITY FIRST

“If ethics are poor at the top, that behaviour is

coped down through the organisation.”

Robert Noyce

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Cost

S. No. Topic

1.

Impairment of assets

2.

Union Budget 2016- What it has for MSMEs and start ups

3.

Highlights of union budget (finance bill)2016- Service Tax

4.

Impact of Interest rate on stock market

5.

Reasons for Withdraw of proposed taxation related to superannuation

and provident fund in the budget 2016

6. Human Resource Reporting

7. Real Estate (Regulation and Development) Bill, 2015

INDEX

This article highlights

Key aspects of the Impairment of Asset

IMPAIRMENT OF

ASSET

CA Chandan and Rohit Madaan

AS-28: IMPAIRMENT OF ASSET

In conformity with AS-28 impairment of assets means

reduction in value of assets due to any market factors or

performance of assets. It is applied to fixed assets including

intangible assets. This Standard prescribes the procedures

that an enterprise applies to ensure that its assets are carried

at no more than their recoverable amount. An asset is carried

at more than its recoverable amount if its carrying amount

exceeds the amount to be recovered through use or sale of the

asset. If this is the case, the asset is described as impaired and

this Standard requires the enterprise to recognise an

impairment loss. This Standard also specifies when an

enterprise should reverse an impairment loss and it

prescribes certain disclosures for impaired assets.

APPLICABILITY

This Standard should be applied in accounting for the impairment of all assets, other than:

(a) Inventories (AS 2, Valuation of Inventories);

(b) Assets arising from construction contracts (AS 7, Construction Contracts);

(c) Financial assets, including investments that are included in the scope of AS 13, Accounting for

Investments; and

(d) Deferred tax assets (AS 22, Accounting for Taxes on Income).

INDICATORS

In assessing whether there is any indication that an asset

may be impaired, an enterprise should consider, as a

minimum, the following indications:

External sources of information

(a) During the period, an asset’s market value has declined

significantly more than would be expected as a result of the

passage of time or normal use;

(b) Significant changes with an adverse effect on the enterprise have taken place during the period, or

will take place in the near future, in the technological, market, economic or legal environment in which

the enterprise operates or in the market to which an asset is dedicated;

(c) Market interest rates or other market rates of return on investments have increased during the

period, and those increases are likely to affect the discount rate used in calculating an asset’s value in use

and decrease the asset’s recoverable amount materially;

(d) The carrying amount of the net assets of the reporting enterprise is more than its market

capitalisation

Internal sources of information

(e) Evidence is available of obsolescence or physical damage of an asset;

(f) Significant changes with an adverse effect on the enterprise have taken place during the period, or are

expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is

expected to be used. These changes include plans to discontinue or restructure the operation to which an

asset belongs or to dispose of an asset before the previously expected date; and

(g) Evidence is available from internal reporting that indicates that the economic performance of an asset

is, or will be, worse than expected.

Method of Calculating Impairment Loss

CARRYING AMOUNT:

It means the book value of an asset after depreciation and after any revaluation which is carried by an

enterprise in its balance sheet.

Carrying amount of fixed assets: Gross book value less accumulated depreciation

Carrying amount of Intangible assets: Original cost less total amortization till date.

RECOVERABLE AMOUNT:

Recoverable amount =net selling amount or value in use whichever is higher

Net selling price =Expected selling price – Expected cost of Disposal

Value in use = Future cash inflow x Pvf

MEANING OF IMPAIRMENT LOSS:

Carrying amount of an asset –Recoverable amount

Impairment loss to be recognized:

As an expense in the P&L Account, immediately, otherwise

As a revaluation decrease (if carried at revalued amount)

This article aims to explain

No tax on Income

1-day Incorporation

Presumptive Taxation Scheme

Corporate Tax Rate for Small Companies

Union Budget 2016:

What it has for MSMEs

and Start-ups

CA Digant Chadha & Vishwas Virmani

KGS

Union Budget 2016: What it has for MSMEs and Start ups

In a speech peppered with references to start-ups and MSMEs, Finance Minister Arun Jaitley in his Budget presentation for 2016-17 had a series of policy initiatives and schemes that aimed at easing the hurdles that start-ups face and ensuring MSMEs in the country get a boost. Launching the Start-up India Action plan, Prime Minister Narendra Modi had mentioned that the government wants to play the supporting role and that of an enabler. The intention is laudable and the Budget looks to provide some very important steps around the ease of doing business, taxation, access to capital for MSMEs and skilling. However, certain issues remain and it may fall short of being the ideal budget that it could have been.

No tax on income from Start-ups:

First talked about the in the Start-up India action plan, the Finance Minister in his Budget speech

said to boost economic growth and employment a 100% deduction of profits for 3 out of 5 years for

start-ups, during April, 2016 to March 2019, with certain riders will be available. Similarly, to

promote innovation, a special patent regime with a 10% rate of tax on income from worldwide the

exploitation of patents developed and registered in India was proposed.

Capital Gains and ARCs:

The Long Term Capital Gains Tax has been a huge bone of contention for the Start-up community.

While listed companies do not attract LTCG beyond a holding period of 12 months, unlisted

companies (read Start-ups and privately held) companies attract 20% till a holding period of 3 years.

The Finance Minister has now reduced the holding period of from three to two years to get benefits

of long term Capital Gain regime in case of unlisted companies. However, this still falls short of

countries like Singapore, that have a 0% Capital Gains Tax, compared to India's 20% (with inflation

benefits). Founders and investors can save millions of dollars on capital gains tax if they shift their

domicile to a country like Singapore.

Another significant move in the Budget has been that Jaitley now allows non-banking financial

companies deduction to the extent of 5% of its income in respect of provision for bad and doubtful

debts. Jaitley, also added that determination of residency of foreign company on the basis of place of

effective management (POEM) will be deferred by one year and reiterated commitment to implement

General Anti Avoidance Rules (GAARs).

To get more investment in Asset Reconstruction Companies (ARCs), which play a very important role

in resolution of bad debts, a complete pass through income-tax to securitization trusts including

trusts of ARCs has been proposed. The income will be taxed in the hands of the investor instead of

the trust.

1-day incorporation:

This in another provision that was first talked about in the Start-up India action plan. The Finance

Minister reiterated that provisions will be made to enable registration of a company in one day. The

Prime Minister had in his Start-up India plan mentioned that 1-day incorporation via a mobile app

would be possible. This is an important proposal and would be a big boost for aspiring

entrepreneurs, if it can be pulled off. As of now, it takes anywhere between 15 and 30 days for a

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company to get incorporated. It would also be interesting would be to see if all steps ranging from

Digital Signatures, Director Identification Numbers (DINs), Name approvals and certificate of

incorporation can be done in 1-day.

Presumptive taxation scheme:

Under the presumptive taxation scheme under

Section 44AD of the Income Tax Act, the limit of

turnover or gross receipts has been raised to Rs. 2

crores from the exiting Rs. 1 crore rupees to benefit

about 33 lakh small business people. It frees a

large number of such assesses in the MSME

category from the burden of maintaining detailed

books of account and getting audit done.

The presumptive taxation scheme is to be now

being extended to professionals with gross receipts

up to Rs. 50 lakhs with the presumption of profit

being 50% of the gross receipt.

Corporate tax for Small Companies:

The corporate income tax rate for the next financial year of relatively small enterprises i.e. companies

with turnover not exceeding Rs. 5 crores (in the financial year ending March 2015) is proposed to be

lowered to 29 % plus surcharge and cess. The new manufacturing companies which are incorporated

on or after 1.3.2016 are proposed to be given an option to be taxed at 25% plus surcharge and cess

provided they do not claim profit linked or investment linked deductions and do not avail of

investment allowance and accelerated depreciation.

Highlights of Union

Budget (Finance Bill)

2016-

Service Tax

This article aims to:

Equip you with recent changes in

union budget.

Garima Sharma & Kajali Agrawal

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Highlights of Finance Bill 2016-Service Tax

Rates of service tax and Swachh Bharat Cess are maintained at 14% and 0.5% Respectively

Krishi Kalyan Cess (KKC) at 0.5% of value of all taxable services to be levied from 1 June 2016.

Right to use radio frequency spectrum and subsequent transfer is a declared service.

Indirect tax Dispute Resolution Scheme, 2016 is introduced, in respect of cases pending before

Commissioner (Appeals), the assessee, after paying the duty, interest and penalty equivalent to

25% of duty, can file a declaration. However, this scheme will not apply in certain specified type of

cases.

Cost of fuel shall also be included in consideration value for availing abatement on services of

renting of motor-cab w.e.f.01.04.2016.

Time limit for filing of application for refund of cenvat vredit in case of export of services is 1 year

from the date of receipt of payment in foreign exchange or issue of invoice if payment is received

in advance.

Banks and other fianancial institutions are allowed to reverse the credit in respect of exempted

services on actual basis in addition to option of 50% of reversal.

Exemption Introduced in Service Tax

Services by way of construction ,etc., of works pertaining to low cost houses up to a carpet area of 60

sq. m per house in a housing project approved by State Government approved and housing projects

under housing for all (HFA) by the competent authority under the “Affordable housing in

partnership” component of Pradhan Mantri Awas Yojana ( PMAY) mission ,w.e.f. 01.03.2016.

Life insurance business provided by way of annuity under the National Pension System regulated by

Pension Fund Regulatory and Development Authority (PFRDA) of India w.e.f. 01.04.2016.

Services provided by Employees’ Provident Fund Organisation (EPFO) to employees w.e.f

.01.04.2016.

Services provided by Insurance Regulatory and Development Authority (IRDA) of India

w.e.f.01.04.2016

Services provided by Regulatory services provided by Securities and Exchange Board of India (SEBI)

w.e.f.01.04.2016.

The rate of Service tax on single premium annuity (insurance) policies is being reduced from 3.5% to

1.4% of the premium subject to conditions. w.e.f.01.04.2016.

Services of General insurance business provided under ‘Niramaya’ Health Insurance scheme

launched by National Trust for the Welfare of Persons for specific disabilities in collaboration with

private/public insurance companies w.e.f.01.04.2016.

Services provided by National Center for Cold Chain Development under Department of Agriculture,

co-operation and farmer’s welfare, Governmnet of India by way of knowledge dissemination

w.e.f.01.04.2016.

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Services provided by Biotechnology Industry Research Assistance Council (BIRAC) approved

biotechnology incubators to incubates w.e.f.01.04.2016.

Services provided by way of skill/vocational training by Training partners under Deen Dayal

Upadhyay Grameen Kaushalya Yojana by w.e.f.01.04.2016.

Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of

Skill Development & Entrepreneurship. w.e.f.01.04.2016.

The threshold exemption limit of consideration charged for services provided by a performing artist

in folk or classical art forms of music, dance or theatre, is being increased from 1 lakh to 1.5 lakh

charged per event w.e.f.01.04.2016.

Service Tax on services of Information Technology Software on media bearing RSP, is being

exempted from service tax w.e.f. 01.03.2016 provided Central Excise duty is paid on RSP in

accordance of section 4A of Central Excise Act.

Exemption withdrawn

Services provided by a senior advocate to an advocate or partnership firm of advocates providing

legal service and by a person represented on an arbitral tribunal to an arbitral tribunal

w.e.f.01.04.2016

Any service provided by Government or Local Authority to business entities, service tax to be

applicable on reverse charge basis w.e.f.01.04.2016.

Transportation of passengers, with or without accompanied belongings, by ropeway, cable car or

aerial tramway w.e.f01.04.2016

Service tax exemption towards construction, erection, commissioning or installation of original

works pertaining to monorail or metro, in respect of contracts entered into on or after 1 March 2016

has been withdrawn.

The Negative List entry that covers “service of transportation of passengers, with or without

accompanied belongings, by a stage carriage” is proposed to be omitted w.e.f.1.06.2016.

The service of transportation of passengers by air-conditioned stage carriage is being taxed at the

same level of abatement (60%) as applicable to the transportation of passengers by a contract

carriage, with same conditions of non-availment of Cenvat credit.

Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post

Graduate Programme in Management (PGPM) (other than executive development programme), 5

year Integrated Programme in Management and Fellowship Programme in Management are being

exempted from service tax.

Relief Measure

Exemption from Service Tax on services by way of construction, erection, etc. of original works

pertaining to an airport, port was withdrawn with effect from 1.4.2015. The same is being restored

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for the services provided under a contract which had been entered into prior to 01.03.2015 and on

which appropriate stamp duty, where applicable, had been paid.

Definition of Governmental authority was amended with effect from 30.01.2014 so as to exempt

services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or

other irrigation works provided to entities set up by Government but not necessarily by an Act of

Parliament or a State Legislature. The benefit of exemption is proposed to be extended to the said

services provided during the period from the 1st July, 2012 to 29.01.2014.Refund of Service Tax paid

on the said services during the period from the 1st July, 2012 to 29.01.2014 shall also be allowed in

accordance with the law including the law of unjust enrichment.

Changes in abatement

Particulars Existing Proposed

The abatement rate in respect of services by way of construction of

residential complex, building, civil structure, or a part thereof, is

being rationalized at 70% by merging the two existing rates (70% for

high end flats and 75% for low end flats).

3.5%/ 4.2% 4.2%

The abatement rate in respect of services by a tour operator in

relation to packaged tour (defined where tour operator provides to

the service recipient transportation, accommodation, food etc) and

other than packaged tour is being rationalized at 70%.

3.5%/ 5.6%

of amount

charged

4.2% of amount

charged

The abatement on shifting of used household goods by a Goods

Transport Agency (GTA) is being rationalized at the rate of 60%,

without CENVAT credit on inputs, input services and capital goods.

(The existing rate of abatement of 70% allowed on transport of other

goods by GTA continues unchanged).

4.2% 5.6%

The abatement rate on services of a foreman to a chit fund is being

rationalised at the rate of 30%, without CENVAT credit on inputs,

input services and capital goods. [The above changes will come into

effect from 1st April, 2016.]

14% 9.8%

Impact of Interest

rate on Stock Market

This article aims to:

Establish relationship between

Interest Rate and Stock Market

CA Gaurav Mundhra & Aditya Tulsyan

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IMPACT OF INTEREST RATE ON STOCK MARKET

The Interest Rate

Essentially, interest is nothing more than the cost someone pays for the use of someone else's money. Homeowners know this scenario quite intimately. They have to use a bank's money, through a mortgage, to purchase a home, and they have to pay the bank for the privilege. Credit card users also know this scenario quite well - they borrow money for the short-term in order to buy something right away. But when it comes to the stock market and the impact of interest rates, the term usually refers to something other than the above examples - although we will see that they are affected as well.

The interest rate that applies to investors is the Federal Reserve's funds rate. This is the cost that banks are charged for borrowing money from Federal Reserve banks. Why is this number so important? It is the way the Federal Reserve (the "Fed") attempts to control inflation. Inflation is caused by too much money chasing too few goods (or too much demand for too little supply), which causes prices to increase. By influencing the amount of money available for purchasing goods, the Fed can control inflation. Other countries' central banks do the same thing for the same reason.

Basically, by increasing the federal funds rate, the Fed attempts to lower the supply of money by

making it more expensive to obtain.

Effects of an Increase

When the Fed increases the federal funds rate, it does not have an immediate impact on the stock market. Instead, the increased federal funds rate has a single direct effect - it becomes more expensive for banks to borrow money from the Fed. Increases in the federal funds rate also cause a ripple effect, however, and factors that influence both individuals and businesses are affected.

The first indirect effect of an increased federal funds rate is that banks increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if they carry a variable interest rate. This has the effect of decreasing the amount of money consumers can spend. After all, people still have to pay the bills, and when those bills become more expensive, households are left with less disposable income. This means that people will spend less discretionary money, which will affect businesses' top and bottom lines (that is, revenues and profits).

Therefore, businesses are also indirectly affected by an increase in the federal funds rate as a result of the actions of individual consumers. But businesses are affected in a more direct way as well. They too borrow money from banks to run and expand their operations. When the banks make borrowing more expensive, companies might not borrow as much and will pay higher rates of interest on their loans. Less business spending can slow down the growth of a company, resulting in decreases in profit.

Stock Price Effects

Clearly, changes in the federal funds rate affect the behavior of consumers and businesses, but the stock market is also affected. Remember that one method of valuing a company is to take the sum of all the expected future cash flows from that company discounted back to the present. To arrive at a stock's price, take the sum of the future discounted cash flow and divide it by the number of shares available. This price fluctuates as a result of the different expectations that people have about the company at different times. Because of those differences, they are willing to buy or sell shares at different prices.

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If a company is seen as cutting back on its growth spending or is making less profit - either through higher debt expenses or less revenue from consumers - then the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company's stock. If enough companies experience declines in their stock prices, the whole market, or the indexes (like the Dow Jones Industrial Average or the S&P 500) that many people equate with the market, will go down.

Investment Effects

For many investors, a declining market or stock price is not a desirable outcome. Investors wish to see their invested money increase in value. Such gains come from stock price appreciation, the payment of dividends - or both. With a lowered expectation in the growth and future cash flows of the company, investors will not get as much growth from stock price appreciation, making stock ownership less desirable.

Furthermore, investing in stocks can be viewed as too risky compared to other investments. When the Fed raises the federal funds rate, newly offered government securities, such Treasury bills and bonds, are often viewed as the safest investments and will usually experience a corresponding increase in interest rates. In other words, the "risk-free" rate of return goes up, making these investments more desirable. When people invest in stocks, they need to be compensated for taking on the additional risk involved in such an investment, or a premium above the risk-free rate. The desired return for investing in stocks is the sum of the risk-free rate and the risk premium. Of course, different people have different risk premiums, depending on their own tolerances for risk and the companies they are buying into. In general, however, as the risk-free rate goes up, the total return required for investing in stocks also increases. Therefore, if the required risk premium decreases while the potential return remains the same or becomes lower, investors might feel that stocks have become too risky, and will put their money elsewhere.

Business Side

High Cost of Borrowing

for Investors

Delay in Investment

Activities.

High

Interest

Reduction in

Future Revenue

Growth of Comp.

Inc. in Cost of

borrowing for

consumption

Reduced

spending

Deflated

stock price

Consumer

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The Bottom Line

The interest rate, commonly bandied about by the media, has a wide and varied impact upon the economy. When it is raised, the general effect is a lessening of the amount of money in circulation, which works to keep inflation low. It also makes borrowing money more expensive, which affects how consumers and businesses spend their money; this increases expenses for companies, lowering earnings somewhat for those with debt to pay. Finally, it tends to make the stock market a slightly less attractive place to investment.

Keep in mind, however, that these factors and results are all interrelated. What is described above are

very broad interactions, which can play out in innumerable ways. Interest rates are not the only

determinant of stock prices and there are many considerations that go into stock prices and the

general trend of the market - an increased interest rate is only one of them. One can never say with

confidence, therefore, that an interest rate hike by the Fed will have an overall negative effect on stock

prices.

This article highlights

Key aspects of Withrawal of Proposed Taxation

related to Superannuation and Provident fund

Withdrawal of Proposed

Taxation related to

Superannuation and

Provident Fund in the

Budget 2016

CA Kunal Jain & Renuka Yadav

Reasons for Withdraw of

Proposed Taxation related to

Superannuation and

Provident Fund in the

Budget 2016

Provision

Under Income-tax Act, tax treatment for the National

Pension System (NPS) referred to in section 80CCD

is Exempt, Exempt and Tax (EET) i.e., the

monthly/periodic contributions during the pension

accumulation phase are allowed as deduction from

income for tax purposes; the returns generated on

these contributions during the accumulation phase

are also exempt from tax; however, the terminal

benefits on exit or superannuation, in the form of

lump sum withdrawals, are taxable in the hands of

the individual subscriber or his nominee in the year

of receipt of such amounts.

However, commutation of Government Pension and superannuation fund is exempt from taxation.

The monthly contribution, annual accrued income, advances/ withdrawals for specific purposes and

final withdrawal from the Recognised Provident Funds (RPFs) on superannuation are also accorded

EEE status i.e. Exempt, Exempt, Exempt.

Amendment

In order to bring greater parity in tax treatment of different types of pension plans, it is proposed to

amend section 10 so as to provide that in respect of the contributions made on or after the 1stday of

April, 2016 by an employee participating in a recognised provident fund and superannuation fund, up

to 40 % of the accumulated balance attributable to such contributions on withdrawal shall be exempt

from tax.

Criticism

Tax should not be the determining criteria for investing. Parity among products on tax

treatment will ensure that those who want to take the equity route can go for NPS, and

conservative investors can go for EPF.

Financial planners say that if the proposal goes through, it would no longer be advisable for

investors to route the employee component into EPF, as only the employer’s component is

mandatory. “Since it is not mandatory for employees to invest in EPF, they can avoid this

product and opt for other instruments that have the EEE benefit.

Withdrawal of Proposal

Facing a strong backlash from salaried tax payers over its proposal to tax withdrawal from EPF, the

government has decided to roll back the budget proposal that sought to create a pensioned society by

discouraging full withdrawal.

"In view of the representation received, the government would like to do a comprehensive review of

this proposal and therefore I withdraw this proposal," finance minister Mr. Arun Jaitley said in a

statement in the Lok Sabha.

This article highlights

Human Resource Reporting in

India

Valuation Models

Human Resource Accounting

o Advantages o Problems

Human Resource

Reporting

CA Puneet Mehra & Raghav Moondra

Human Resource Reporting

Introduction The past few decades have witnessed a global transition from manufacturing to service based economies.

Human elements are becoming more important input for the success of any corporate enterprise. It helps

the management to frame policies for human resources. Human resource accounting is a process of

identifying and measuring data about human resources. It means accounting for people as an

organizational resource. It involves measuring the cost incurred by an organization to recruit, select, hire,

train and develop human assets and also involves measuring the economic value of people in the

organization. It is concerned with measurement of cost and value of people in the organization.

HRR in India- Human resource accounting (HRA) is one of the latest concepts adopted by Indian

companies in recent times. Though Human Resources Accounting was introduced back in the 1980s, it

started gaining popularity in –India after it was adopted and popularized by NLC. Most of the enterprises

which follow HRA spare a separate section in their annual reports for a detailed account of their human

resources. Human asset reporting in India usually includes a profile of human assets, the compensation

pattern, training and development, human asset productivity, human asset value, and the total wealth of

the organization.

In the present context, most of the organizations have not only taken measures to develop their human

resources but also taken measures to value these resources. Many Indian companies have taken steps for

the valuation of their human resources. For example, Infosys Technologies valued its human resources in

1995-96 which was Rs. 184 crores, much more than the value of its physical assets of Rs. 84 crores.

Similarly, Balrampur, Chini valued its human resources at Rs. 10.43 crores and BPL Limited at Rs. 125.44

crores. There are numerous such examples. Human resource accounting provides tools for valuation of

human resources and measures to take appropriate actions.

Valuation Models Name Given by Model Cost Based Model Capiltalisation of Historic Cost

R. Likert Value= Cost of recruitment + Cost of Training + Cost of Development Such value is amortized over period of service. If employees leave organization before completing service period, balance HR Asset should be written off.

Replacement Model

Flamholtz Value= Expected sacrifices to be made by organization to replace employee

Such sacrifices can be based on position or individual. This model is highly subjective.

Economic Value Models Opportunity Cost Model

Hekimian & Jones

Value of the employees is the opportunity for earning generated by employees. It is generally based on bidding of scarce employees, This model is highly subjective.

Group Model Jaggi & Lau i- Value should be based on group of homogeneous employees (e.g. all managers of company)

ii- Estimate probability for employees to remain in organization for a period.

iii- Calculate economic value of employees iv- Value of employees = Number of employees

x Probability factor x Economic value of Employees

Discounted Wages & Salary Method

Lev & Schwartz

T

Value= ∑ I(t)/(1+r)T-i

T=i

Where, I(t) = means current salary with expected growth r = discount rate i = present age T = retirement age If probability to continue is multiplied then value of HR can be improved. It is one of the most common methods.

Human Resource Accounting – Advantages Many organizations, particularly in the USA, are following the human resource accounting approach. In our country, too, there is a need for establishing systems which can generate monetary and non-monetary information about human beings in the organizations, particularly about managerial talents whose dearth is felt by business organizations. This is due to the fact that human resource accounting offers following advantages:

Gives valuable information to the management for effective planning and managing human resources.

It helps in measurement of standard cost of recruitment, selecting, hiring, and training people and organization can select a person with highest expected realizable value.

Human resource accounting can change the attitude of managers completely, thereby; they would try to maximize the exempted value of human resources and effective use of human resources in the organization.

It also provides necessary data to devise suitable promotion policy, congenial work environment, and job satisfaction to the people.

Human Resource Accounting – Problems There are certain operational problems in human resource accounting because it attempts to measure intangibles. Therefore, subjective factors may play crucial role. Thus, the major operational problems involved in human resource accounting are of the following types:

There is no well-set standard accounting practice for measuring the value of human resources. Therefore, various organizations that adopt human asset valuation use their own models. With the result, value of human assets of two organizations may not be comparable.

The valuation of human assets is based on the assumption that the employees may remain with the organization for certain specified period. However, this assumption may not hold true in today’s context because of increased human resource mobility.

There is a possibility that human resource accounting may lead to the dehumanization in the organization if the valuation is not done correctly or results of the valuation are not utilized properly.

There is also a possibility that trade unions may oppose the use of human resource accounting. They may want party of wages/salaries with value of employees.

Conclusion The conceptual thinking about valuation human resources is still in a developing stage. No model of HR accounting is accepted by the accounting bodies all over the world. However, still we find some application of Lev & Schwartz model is most public sector units and IT based sectors. Considering the great significance of HRA proper initiation should be taken by the government along with that other professional & accounting bodies both at the national & international levels for the measurement & reporting of such valuable assets.

This article aims to

Highlight key

features of the bill

Examine effect of

bill on Buyers and Builders

Real Estate (Regulation

and Development) Bill,

2015

Tayyab Ali & Abubakar

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India’s new real estate bill: Builders’ agony, buyers’ delight

The onset of the Indian summer this year may have one particular industry sweating more profusely than

others even as its customers sigh in relief.

The Lok Sabha cleared the Real Estate (Regulation and Development) bill on Tuesday, 15th March, prompting PM Narendra Modi to hail it as "great news for home buyers". The bill, which seeks to set up a regulatory mechanism for the real estate sector to protect the rights of home buyers by ensuring timely delivery by builders and providing options for recourse if there is a delay. The bill was passed by the Rajya Sabha on March 10 after remaining pending since 2013.

Here are some important features of the bill: All projects will have to be registered with regulatory authorities, and developers will have to disclose

project information including details of the promoter, project, layout plan, land status, status of

approvals and agreements along with details of real estate agents, contractors, architects and

structural engineers.

There will be no discrimination of any kind on basis of religion, region, caste, creed or sex and gender

and we will include that in the rules. The government may bring in a "non-discriminatory" clause to

allow anyone (including a transgender) to buy property in a complex. When some House members

raised the issue of discrimination in selling flats and plots to certain communities, urban development

minister M Venkaiah Naidu said the constitution provides equality for all.

Builders will have to deposit a minimum of 70% collections from buyers in an escrow account to cover

cost of construction and land. State-level Real Estate Regulatory Authorities will be established to

regulate transactions related to both residential and commercial projects and ensure their timely

completion and handover.

No pre-launch will be allowed without getting all approvals from the local authorities and without

obtaining registration from the regulator. All incomplete projects are to come under the regulation.

The bill covers any project that is more than 500 sq. m or has more than eight apartments (states can

lower this requirement further).

The bill states the builder has to return the payment with interest to buyers who are affected by such

"incorrect, fast statements contained in the notice, advertisement or prospectus or the model

apartment, plot or building as the case may be".

KGS

Builders can no longer go scot-free by putting up flashy designs or photographs of a project to attract

buyers and failing to deliver projects that match the

pictorial claims.

The authority can even order "compensation" to

consumers in case of misleading advertisements.

It provides for imprisonment of up to three years for promoters and up to one year for real estate

agents and buyers and/or monetary penalties if they violate orders of appellate tribunals.

In addition, developers will have to provide brief details of projects launched in the past five years,

both completed or under-construction, and the current status of the projects. These may be made

available on the regulator's website so buyers can take an informed decision.

It has been made mandatory to set-up an allottees association within three months of the allotment of major units/properties so that the residents can manage common facilities like a library and a common hall. Also, if the buyer finds any structural deficiency in the property, then he/she can contact the developer for after-sales service within one year of possession. The promoters or developers cannot make any changes to the plan without consent of the buyer, the bill states.

Is it really negative for builders and developers?

Without a tough housing regulator, it is difficult to differentiate

a good builder from a bad one. Such a body would be bad news

only for the unscrupulous ones. The bill comes at a time when

prospective buyers are simply avoiding under-construction

projects, drying up a source of interest-free funds for debt-

ridden realty firms.

It will also ensure that fly-by-night operators and land

grabbers/speculators are sieved out. As a result, there will be

fewer competitive bidders vying for the limited supply of land.

That will check land prices. Timely completion of projects also

means there would be a steady increase in supply of homes.

All these will eventually bring down home prices and increase

demand. That will be good for the overall economy too as the

housing sector has strong backward (cement, steel and other

building material industries) and forward (furniture and

furnishings, interior decoration, electrical and electronics)

linkages with other industries.

That would also mean creation of more jobs.

However, it will be a while before the housing regulator becomes a reality, as states have to follow up. It

still doesn’t make sense to run after under-construction properties as builders would want to impress

upon state authorities to drop the idea of bringing ongoing projects under the bill’s ambit.

KGS

Contact Name E-mail Mobile Mr. Anuj Somani anujsomani@kgsomani.com +91 9871098777 Mr. Bhuvnesh Maheshwari bhuvneshmaheshwari@kgsomani.com +91 9810031993

Head office: Branch Offices: Network Offices: DELHI MUMBAI BANGALORE

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Disclaimer

• This material and the information contained herein prepared by the authors is of a general nature and does not exhaustively deal with the subject discussed. • Although the authors have put their earnest effort in providing accurate and appropriate information, the article is not intended to be relied upon as the sole basis for any decision which may affect you or your business. The authors recommend you take professional advice before acting on specific issues. • KGS is neither responsible for any views, opinions and statements made by the authors nor is liable for consequences, if any, arising from actions based on such views or opinion.

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