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Enterprise Resource Planning - ERP
Friday, January 30, 2009

ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes of an organization into one single system. Usually ERP systems will have many components including hardware and software, in order to achieve integration, most ERP systems use a unified database to store data for various functions found throughout the organization.

The Ideal ERP System is when a single database is utilized and contains all data for various software modules. These software modules can include:

• Manufacturing: Some of the functions include; engineering, capacity, workflow management, quality control, bills of material, manufacturing process, etc.
• Financials: Accounts payable, accounts receivable, fixed assets, general ledger and cash management, etc.
• Human Resources: Benefits, training, payroll, time and attendance, etc
• Supply Chain Management: Inventory, supply chain planning, supplier scheduling, claim processing, order entry, purchasing, etc.
• Projects: Costing, billing, activity management, time and expense, etc.
  Customer Relationship Management: sales and marketing, service, commissions, customer contact, calls center support, etc.
• Data Warehouse: Usually this is a module that can be accessed by an organizations customers, suppliers and employees.

Advantages of ERP Systems

• A totally integrated system
• The ability to streamline different processes and workflows
• The ability to easily share data across various departments in an organization
• Improved efficiency and productivity levels
• Better tracking and forecasting
• Lower costs
• Improved customer service

Disadvantages of ERP Systems

• Customization in many situations is limited
• The need to reengineer business processes
• ERP systems can be cost prohibitive to install and run
• Technical support can be shoddy
• ERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future.

For further details pleae click here!

Labels: accounting

posted @ 4:53 PM, ,

Islamic standard for Ijarah - IFAS 2
Thursday, January 29, 2009

State Bank of Pakistan has decided to allow implementation of Islamic Financial Accounting Standard for Ijarah (IFAS 2) w.e.f January 01, 2009. Accordingly, Islamic Banking Institutions (IBIs) shall ensure that henceforth all returns / statements submitted to State Bank as well as the Quarterly/Annual Financial Statements shall be prepared in line with this Standard.
To see the complete standard click here!
Ref: SBP

Labels: accounting

posted @ 12:11 PM, ,

SBP guidelines for credit card business
Wednesday, January 28, 2009

The State Bank of Pakistan issued comprehensive operational guidelines for credit card business of commercial banks/DFIs, outlining code of conduct for various aspects of credit card operations including their marketing, interest rate charges, recovery of dues, billing processes etc.
Some of the main features of the guidelines are; Banks / DFIs

• are advised to quote interest rate and service charges on annual basis.


• are required to set well defined service level for each of the product/service.


• should also inform the credit card holder on the interest rate or services charges through advertisement and/or sending information to card holders on their addresses.


• should not levy any charge without the prior consent of the card holder.


• are also advised that interest amount should be charged on net credit i.e. after deducting the amount paid by the card holder.


• must ensure that their recovery/collection officers should not resort to any verbal or physical harassment of the delinquent credit card holder, their family members, referees and friends during recovery/collection efforts.


• should discourage aggressive and hard selling & marketing practices during working/office hours; except with prior appointment of the prospective customer.


• should seek prior consent of their customers/account holders for informing them on new products and services on telephone as and when introduced.


• are advised to simplify the credit card terms and conditions, and keep them clear and understandable both in English and Urdu languages.


• may also arrange online complaint registration on their websites

To see Complete guidelines please visit here!

Labels: Economy and Business, Pakistan Economy

posted @ 2:30 PM, ,

ICAP announced CA Final Result
Tuesday, January 27, 2009

My heartiest Congrtulations to all friends who qualified as Chartered Accountant completely / partly. Some of these are

• Muhammad Khurrum Saeed - Qualified


• Ghulam Abbass - Qualified


• M. Labeeb Subhani (Got 1 Permanent Credit in Module-F)


• Muhammad Kamran (Got 3 Permanent Credits in Modu-F)


• Noor un Nabi (Got 3 Permanent Credits in Module-F)


• Bilal Saeed (Got 3 Permanent Credits in Module-F)


• Faisal Raza (Got 3 Permanent Credits in Module-F)

Wish you all the best . Inshallah Allah will bestow all of us his blessing.

Labels: Exams

posted @ 1:45 PM, ,

GDP Vs. GNP

The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and input for a given country's economy. GDP can be defined in three ways, all of which are conceptually identical.

• First, it is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time (usually a 365-day year).


• Second, it is equal to the sum of the value added at every stage of production (the intermediate stages) by all the industries within a country, plus taxes less subsidies on products, in the period.


• Third, its equal to the sum of the income generated by production in the country in the period—that is, compensation of employees, taxes on production and imports less subsidies and gross operating surplus

Labels: Economy and Business

posted @ 9:51 AM, ,

Islamic Economic System
Monday, January 26, 2009

Islamic Economics differs fundamentally from man-made laws and systems in defining economic problem. It represents the only wholly independent, alternative economic paradigm in the world today. It is based on principles revealed from Islamic sources as norms for human welfare that offer a strikingly alternative set of parameters for economic activity.


Some of the Salient Features of islamic economic system include

1. Allah is the sustainer


2. God is real owner of everything and man is merely a trustee


3. Everything created for service and use of man


4. Concept of halah and haram


5. System of sadaqat and zakat


6. Prohibition of interest


7. Ban on hoarding of wealth


8. Policy of moderation


9. Condemnation of monasticism and materialism


10. Equity and not equality

To see in details please click here!

Labels: Economy and Business

posted @ 5:10 PM, ,

Economic and Business Updates - January 19 to 25, 2009

• The Stare Bank announces a Rs,12 billion plan, to help borrowers of the export financing scheme, deferring payment of their loans for one year.


• The securities and Exchange commission of Pakistan (SECP) issues draft of , the companies (Buy-back of shares) Regulation, 2009 to elaborate the procedure, for the listed companies to buy back/repurchase their own shares.


• The UAE government agrees to initiate a $5 billion Khalifa point oil refinery project in Balochistan.


• The manufacturing industry has opposed further rise in gas price being suggested by the sui southern gas company Limited. The adjustment is in addition to Rs,18.55 per MMBTU allowed in November last year.


• The export of non-textile products soared by 29.3 percent in the first half of the current fiscal year to $4.436 billion as against $3.43 billion over the same period last year mainly on the back of massive export of rice.


• The world Bank blocks lending for two key market based loans of at least $834 million due to the country,s low credit rating, says an official.


• Pakistan's rice export may be affected badly as India abolishes $200 per ton export duty on basmati, imposed last year, say local exporters.


• The Federal Board of revenue exempts import of capital equipment including plant machinery equipment and accessories for development of projects in special industrial and economic zones from customs duty and sales tax.


• The government refuses to remove the five per cent duty on imports of capital good despite Minister for investment Waqar Ahmad’s efforts to appease the international retail store companies, say source in the ministry.


• Due to non-payment of Rs.1-Rs.1.5 billion by KESC the independent power producers have reduced power supply to KESC by 50 percent which has increased suffering if the people with frequent power outages in the city.


• The world Bank asks the government to collect at least Rs.30 billion revenues through petroleum development levy (PDL)on petroleum products during the quarter (January March) to achieves the revenue target and ease budget deficit.


• The Federal government orders investigation against oil refineries for misusing deemed duty primary purpose of which was upgradation of the facilities well informed sources in the petroleum ministry reveal.


• The green tractor scheme of the Punjab government aimed at providing 10,000 tractors to farmers at subsidised rates is in jeopardy due to elimination of subsidy to tractor manufactures say sources.


• South Korea will give a soft loan of $30 million to Pakistan to purchase urea fertiliser to meet the farm sector requirement.

Ref: Dawn dated 26-01-2009 (Economic and Business Review)

Labels: Economy and Business, Pakistan Economy

posted @ 1:40 PM, ,

Monthly Review - January 2009
Saturday, January 24, 2009

Doubt about Pakistan's ability to meet IMF targets remains due to following indications;

• The government will miss an ambitious tax collection target of PRs1.4trn for 2008/09.
• The government to secure a level of zero borrowing for the first nine months of 2008/09, which seems highly unlikely to be achieved.
• The tax collection target for the first half of 2008/09 was PRs515bn. However, the indications are that the government may not have raised much more than PRs400bn during that period, despite high rates of inflation that should have boosted the collection of various sales taxes.
• With expenditure rising more rapidly than revenue collection, it seems highly unlikely that the government will meet the IMF target of a 4.2% fiscal deficit in 2008/09 (the deficit stood at an estimated 6.8% in 2007/08).
  

If, as seems likely, the government misses its targets, three options will arise.

• The first would be for the government to renegotiate the deal with the IMF. This would lead to tighter conditions and a consequent reduction in the economic policy options available to the government.


• The second option would be for the government to raise existing taxes or to introduce new ones. Given the economic downturn and the risk that tax increases would exacerbate inflationary pressures (which, although decreasing, are still strong), this is another unpalatable option. Nevertheless, there are indications that the government is considering ending tax exemptions on food and medicines.


• The third option would be for the IMF to grant Pakistan a waiver. It appears that the IMF!s stand-by facility assumes a relatively high oil price, which would have a positive effect on government taxes on petroleum and related products. This could provide a pretext for allowing Pakistan to miss its targets so early in the package. The second installment of the stand-by arrangement is due in March. Successive governments have attempted to increase levels of tax compliance, but these have had little long-term impact

Ref: Economist Intelligence Unit

Labels: Economy and Business, Pakistan Economy

posted @ 1:51 PM, ,

Exporters get one-year grace for loan payment
Friday, January 23, 2009

Exporters have been demanding extension of payment, saying a slowdown in business activities and a liquidity crunch had put them in a difficult situation. The State Bank of Pakistan (SBP) announced on Thursday a Rs.12.000 billion plan to help borrowers of the export financing scheme, deferring payment of their loans for one year.

Salient features of the plan are as follows;

• Banks and development finance institutions (DFIs) to provide grace period to borrowers who have availed financing under the Long Term Financing for Export Oriented Projects (LTF-EOP), including Debt Swap Facility under LTF-EOP scheme and Long Term Financing Facility (LTFF) scheme.
• This is a one-time facility effective from the date of issuance of the circular and will remain valid only up to March 31. Any request received after March 31 will not be considered by banks or DFIs,
• Banks and DFIs may provide deferment of one year in repayment of the principal outstanding under the above schemes as of Dec 31, 2008.
• Under this facility repayment dates for all installments of principal amounts falling due between Jan 1 and Dec 31, 2009, may be re-fixed after a passage of one year from the due date. “For this purpose, banks or DFIs will carry out their due diligence of the individual borrowers on case-to-case basis.”
• No benefit under the circular should be given to the borrowers having non-performing loans, classified under SBP prudential regulations.
• In case a loan has already been rescheduled by a bank or DFI as per its policy or in case a borrower has defaulted on loans, such cases would not be eligible for the benefit under these instructions.
• The borrowers, who have already repaid LTF-EOP/LTFF loans, will not be eligible for reimbursement.
• Similarly, in case a loan is not payable during 2009 as per its original repayment schedule, it will not qualify for the benefit under these arrangements.
• Only loans outstanding as of Dec 31, 2008, will qualify for the benefit of grace period. As such, the loans disbursed on or after Jan 1, 2009, will not qualify for the said benefit.
• The banks and DFIs will keep on record the basis for grant of said benefit to the borrowers concerned, which will be checked by the Banking Inspection Department during inspection of banks and DFIs to ensure that this has been allowed as per laid-down criteria.
• Banks and DFIs will take into account the track record, conduct of account, underlying collateral, financial condition and future outlook, volume of exports and overall risk profile of the borrowers in evaluating their requests.

Ref: Business Recorder dated 22-01-09

Labels: Economy and Business, LTFF

posted @ 11:43 AM, ,

Companies Buy-Back of Shares - SECP

Section 95A of the Ordinance, recently notified by the Federal Government allows the listed companies to buy-back/repurchase their own shares and hold such shares as Treasury Shares, whereas under the old Section 95A, the repurchased shares were required to be cancelled. The buy-back /repurchase may be used as a tool to bring stability in market prices of the shares that are undervalued on the stock market. Buy-back/repurchase of shares by listed companies may consequently improve earning per share.

Conditions for Purchase of Shares:
(1) A company may Purchase its own shares if it fulfills the following conditions:

• it has paid-up capital of not less than two hundred million rupees ;
• based on the latest audited accounts, its total debt is not more than three (3) times of its equity, and its current assets are not less than its current liabilities;
• its Free Float is not less than one hundred million rupees (face value);
• after the Purchase, its Free Float is not less than the threshold given below:
  Paid-up capital Rs. 200 million to Rs. 500 million, not less than 40%
  Above Rs. 500 million to Rs. 1,000 million, not less than 20% or Rs. 200 million (whichever is higher)
  Above Rs. 1,000 million to Rs. 5,000 million, not less than 10% or Rs. 250 million (whichever is higher)
  Above Rs. 5,000 million, not less than 10% or Rs. 500 million (whichever is higher)
• it has obtained approval by way of special resolution held within a period of five (5) weeks of the date of meeting of the board of directors proposing the Purchase;
• it has obtained auditors’ certificate, certifying that the Purchasing Company has sufficient funds for the Purchase; and
• the directors including the chief executive of the Purchasing Company, by way of a resolution passed by not less than seventy five percent of the total number of directors at a meeting, have made a declaration that the Purchasing Company is solvent.

(2) A company that has obtained relaxation, if any, from the requirements of listing regulations of any stock exchange of the country or rule 9 of the Companies (Issue of Capital) Rules, 1996 regarding minimum allocation of capital to the general public, shall not Purchase shares under the Regulations unless the condition relating to increase in paid-up capital or relating to disinvestment of shares by the sponsoring shareholders, imposed at the time of granting such relaxation by the Commission or the stock exchange (s) is met.

(3) A share that has not completed at least two anniversaries of its formal listing on a stock exchange shall not be eligible for Purchase under the Regulation.

(4) These Regulations shall not be applicable on buy-back of shares made for delisting of a company.

(5) A company shall not purchase shares in case any petition for its winding up has filed with a court.

(6) During the Purchase Period, a Purchasing Company shall not file petition for voluntary winding up.

Read the complet draft of the said Regulations here!

Labels: Compnay Law

posted @ 10:26 AM, ,

Citigroup Strategy for 2009
Thursday, January 22, 2009

Investment Summary:

• The dividend yield for Asia ex now stands at 4.2%, higher than the level in the market low of 1998 and the 1990 recession. The risk for the markets is to the upside more than the downside.


• What remains cheap on mid cycle earnings/ dividend duration/ downside vs. prior recessions is mostly North Asia, amongst the defensives telecoms look attractive, amongst the interest rate sensitive the banks look attractive and in the cyclical space it is technology.
• Large caps remain better value. It still pays to own what the consensus does not.
• Earnings growth forecasts at -18.4% for 08 and -3.5% for 09 remain too high. During prior recessions EPS has declined by between 30% to 50%. Expect more monetary easing and more fiscal stimulus.
• For the six emerging markets of Asia outflows have taken fund flows back to their mid-February 2004 level leaving just US$44bn of potential outflows until all fund inflows since SARS are out.
• We continue to focus cheap sectors and markets, telecoms, banks and utilities remain favorites. We recently added to tech. HK, Korea, Taiwan and Malaysia are our overweight. We remain heavily focused on cash flow and dividend yield.

Dividend Duration:

• Short Is Better Than Long
• Investors seek imminent cash flows over capital appreciation
• Buy short dividend duration with strong long-term EPS growth
• Longest duration – India 42 years
• Shortest duration – Thailand 14 years
• Banks have the shortest payback period, Utilities the longest

Who’s in Charge – the Market, Earnings or the Consensus?

• Markets are supposed to lead; not so in Asia
• IBES consensus never picks the top nor the trough — On average, the IBES consensus lags the earnings cycle at the peak by 6 months. Upon recovery, IBES continues to forecast doom and gloom for a further 4 months
• Markets have tended to recover after the 9th month of negative revisions
• IBES EPS forecasts down to -18.4% for 08 — IBES forecasts for 2008 have come down from a peak of 10.8%. Prior growth slowdowns have led to EPS growth of -11% to -44%

Buying Tangibles, Not Dreams

• Low P/CF outperforms during and ahead of economic slowdowns
• High dividend yield outperforms during and ahead of economic slowdowns
• There is not exponential premium for high EPS growth. Average EPS growth outperforms high EPS growth.
• Focus on mid-cycle earnings, not current P/E

A Ratio for Every Season

• Equity markets may lack the glamour of the fashion industry but to our surprise certain investment factors do better in certain quarters than others
• May to July is P/CE season, followed by dividend yield season
• As we move towards the August to October quarter and dividend yield has proven to be most successful, so banks, tech and materials would be overweights and still Taiwan,
  HK and Singapore.
• Market and flow-wise the next three months are weak historically

Goodbye Momo, Welcome Value

• 2008 will see the shift back towards value
• Investor churn rates have begun to fall. They always peak with the market.
• Retail flows are late cycle not early

Myth: Decoupling. Busted, for Now

• Growing consensus that Asia can decouple. We find no supportive evidence
• Asian ROEs fell more in the 2001 downturn than in the three prior US recessions
• A common misconception. North Asia is more US growth sensitive
• Domestic consumption to GDP ratios have fallen in Asia, export ratios have risen
• Stock market correlations stand at 30-year highs

What We Like and What to Avoid

• Greater emphasis on value over momentum
• North Asia over South Asia. Under-owned vs. over-owned markets
• Underweight cyclical and growth.
• Overweight Telecom, Banks, Technology
• Underweight Materials, Consumer Staples, Other Financials, Real Estate
• Overweight Korea, Taiwan, Hong Kong and Malaysia
• Underweight China, India, Singapore, TIP

Ref: Report by Markus Rosgen, Head of Regional Equity Strategy (Citigroup)

Labels: Economy and Business

posted @ 11:41 AM, ,

Basel II - An Introduction
Tuesday, January 20, 2009

Background:
Capital requirements rules state that credit institutions, like banks and building societies, must at all times maintain a minimum amount of financial capital, in order to cover the risks to which they are exposed. The aim is

• to ensure the financial soundness of such institutions,
• to maintain customer confidence in the solvency of the institutions,
• to ensure the stability of the financial system at large, and
• to protect depositors against losses.

The purpose of Basel II is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face.
Such an international standard can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse
Generally speaking, these rules mean that the greater risk to which the bank is exposed, the greater the amount of capital the bank needs to hold to safeguard its solvency and
The Basel II framework consists of three 'pillars':

• Pillar 1 sets out the minimum capital requirements firms will be required to meet to cover credit, market and operational risk.
• The rules under Pillar 2 create a new supervisory review process. This requires financial institutions to have their own internal processes to assess their capital needs and appoint supervisors to evaluate an institutions’ overall risk profile, to ensure that they hold adequate capital.
• The aim of Pillar 3 is to improve market discipline by requiring firms to publish certain details of their risks, capital and risk management.

The Committee listed a number of operational risk events which were identified (with co-operation from the industry) as having the potential to result in substantial losses:
Internal fraud – for example, intentional misreporting of positions, employee theft, and insider trading on an employee’s own account.

• External fraud – for example, robbery, forgery, cheque kiting, and damage from computer hacking.
• Employment practices and workplace safety – for example, workers compensation claims, violation of employee health and safety rules, organised labour activities and discrimination claims.
• Clients, products and business practices – for example, misuse of confidential customer information, improper trading activities on the bank’s account, money laundering, and sale of unauthorised products.
• Damage to physical assets – for example, terrorism, vandalism, earthquakes, fires and floods.
• Business disruption and system failures – for example, hardware and software failures, telecommunication problems, and power failures.
• Execution, delivery and process management – for example, data entry errors, incomplete legal documentation and unapproved access given to client accounts.
  

Three approaches for calculating capital adequacy
In calculating operational risk capital charges, Basel II set out three different methods which may be adopted:

• The Basic Indicator Approach
• The Standardised Approach
• The Advanced Measurement Approach
  

The Basic Indicator Approach is the simplest of the three approaches, and will be the default option for most firms. It applies a relatively straightforward calculation based on the firms' income to determine its capital requirements.
The Standardised Approach again relies on calculations based on income, but with different percentages applying across different business lines. To be able to take advantage of the Standardised Approach firms will have to meet certain qualifying criteria.
The Advanced Measurement Approach is the most complicated of the three options. Under this approach, each firm calculates it own capital requirements, by developing and applying its own internal risk measurement system.

To see the full basel document, please visit here!

Labels: Treasury

posted @ 3:30 PM, ,

Medical Allowance - Tax Treatment

According to Clause 139 of part 1 (Exemption from total income) of 2nd Schedule of Income Tax Ordinance, 2001

• in accordance with terms of employment: The amount provided is fully exempt if NTN of medical practitioner and employer's attestation are available.
• Not in accordance with terms of employment: The amount provided is fully taxable

b) Medical Allowance provided: Tax Treatment is exempt upto 10% of Basic Salary

c) Medical allowance is provided in addition to medical facility or reimbursement in accordance with the terms: Tax Treatment is Medical allowance fully taxable and Facility / reimbursement is Fully Exempt if NTN of medical practitioner and employer's attestation are available.

d) Medical allowance is provided in addition to medical facility or reimbursement but NOT in accordance with the terms: Tax Treatment is Medical allowance is exempt upto 10 % of Basic Salary and Facility / reimbursement is Fully taxable.

Labels: Taxation

posted @ 10:11 AM, ,

Economic and Business Updates - January 12 to 18, 2009
Monday, January 19, 2009

THE State Bank has announced that all purchases of foreign exchange relating to the import of POL products will be made by bank s from the inter-bank market.

• THE Regional Tax Office (RTO), Karachi, collects Rs53.787 billion during the first half (July-Dec) of 2008-09, showing a growth of 38 percent over the corresponding period last year when the collection stood at Rs38.968 billion.
• THE Fauji Cement Company Limited is to build the largest cement plant in the country. The company has entered into contract with the German firm Polysius AG to supply state of the art plant to produce 7,200 tons of cement per day of clinker, says a press release of the FCCL.
• THE Federal Board of Revenue reduces depreciation from two to one percent on import of old and used vehicles by overseas Pakistanis.
• THE core inflation is above 18 percent which can be a bad sign for the economy as further increase in the policy discount rate is attached with the lowering of core inflation, says the State Bank of Pakistan notification.
• INFLATION decelerates from a three decade high in December 2008 after the State Bank of Pakistan raises its benchmark interest rates coupled with slight easing in food prices, suggests data of the Statistics Division.
• THERE is no chance of improvement in car sales in immediate future as the economy is already in recession and the future outlook remains gloomy.
  A MASSIVE outflow of over $25 million of foreign portfolio investment from the country’s equity market is witnessed during the week ended January 10, 2009.
• THE country’s trade deficit during the first six months of the current fiscal year surges to $9.599 billion, reports the Federal Board of Statistics.
• ADVISOR to Prime Minister on Finance Shaukat Tarin says the Government is considering imposing ban on investment by DFIs and investment companies in the stock market.

Labels: Economy and Business

posted @ 12:12 PM, ,

Terms of Delivery used for International Trade
Saturday, January 17, 2009

There are a series of international sales terms widely used throughout the world. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices. Some of those Terms of delivery include following

Ex Works (EXW) : (Departure)

- The seller makes the goods available at his premises.
- The risk of ownership is transferred to the buyer at sellers premises.

Free On Board (FOB) : (Main carriage unpaid)
- The seller must load the goods on board the ship nominated by the buyer
- Cost and risk being divided at ship's rail.
- The seller must clear the goods for export.

Cost and Freight (CFR or CNF) : (Main carriage paid)
- The seller must pay the costs and freight to bring the goods to the port of destination.
- The risk is transferred to the buyer once the goods have crossed the ship's rail

Cost, Insurance and Freighnt (CIF): (Main carriage paid)
- The seller must pay the costs and freight to bring the goods to the port of destination.
- The risk is transferred to the buyer once the goods have crossed the ship's rail
- The seller procure and pay for insurance for the buyer

Delivered Ex Ship (DES) : (Arrival)
- The passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer.
- The seller pays the same freight and insurance costs as he would under a CIF arrangement.
- The seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port.
- Costs for unloading the goods and any duties, taxes, etc. are for the Buyer.
Ref: Incoterms or international commercial terms closely correspond to the UN Convention on Contracts for the International Sale of Goods

Labels: Economy and Business

posted @ 10:42 AM, ,

UN predicts zero world growth in 2009
Friday, January 16, 2009

• Deepening recession in rich countries

• Slow the sale of consumer goods and raw materials from developing nations.
• The U.S. economy could shrink by as much as 1.9 percent
• Euro-zone economies will contract by up to 1.5 percent
• Japan is expected to see negative growth of between 0.3 and 0.6 percent
• Mexico appears likely to tip into the red zone as well, with a contraction of 1.2 percent
• China's growth predicted to slow to 7 percent and India's to around 6 percent
• The world's poorest economies will grow by less than 5 percent
• Consumers in European countries are saddled with huge foreign currency loans
• Debtors in those countries are finding it hard to repay mortgages and borrowings
  

Some of the suggestions to make over all this crises are;

• Countries are required to put together massive economic stimulus packages.
• Governments in Japan, Germany and China in particular have room to maneuver and should do so sooner rather than later.
• The reduction of debt in the private sector has to be compensated by a huge amount of public debt, at least temporarily, if we want to stabilize the global economy.
  

Ref: United Nations Geneva (Associated Press) by Frank Jordan

Labels: Economy and Business

posted @ 2:00 PM, ,

Top Obama Advisers Clash on Global Accounting Standards

Even as Volcker was pushing IFRS, however, Mary Schapiro, Obama's nominee for chairman of the Securities and Exchange Commission was advocating a go-slow approach on implementing the global standards in the United States. Schapiro, who heads the Financial Industry Regulatory Authority, told the Senate Banking Committee during her confirmation hearing today that she plans to back off of current SEC Chairman Christopher Cox's plans proposed roadmap for converting U.S. companies to international financial reporting standards. "I will not be bound by the existing roadmap that's out for public comment," she said.

Schapiro said she has concerns about the pace of the timeline, the independence of IASB, and the quality of the standards themselves. Considered more principles-based than U.S. generally accepted accounting principles, IFRS are not as detailed and give more room for interpretation, she said.

Ref: Cfo.com

Labels: accounting

posted @ 10:12 AM, ,

Financial Ratios
Wednesday, January 14, 2009

Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance.
A good financial analyst will build in financial ratio calculations extensively in a financial modeling exercise to enable robust analysis. Financial ratios allow a financial analyst to:

Labels: accounting

posted @ 1:49 PM, ,

Refund of Excess Tax
Tuesday, January 13, 2009

Section 170: Refunds states that
(1) A taxpayer who has paid tax in excess of the amount which the taxpayer is properly chargeable under this Ordinance may apply to the Commissioner for a refund of the excess.
(1A) Where any advance or loan, to which sub-clause (e) of clause (19) of section 2 applies, is repaid by a taxpayer, he shall be entitled to a refund of the tax, if any, paid by him as a result of such advance or loan having been treated as dividend under the aforesaid provision.
(2)An application for a refund under sub-section (1) shall be –
(a) made in the prescribed form;
(b)verified in the prescribed manner; and
(c) made within two years of the later of –
(i) the date on which the Commissioner has issued the assessment order to the taxpayer for the tax year to which the refund application relates; or
(ii) the date on which the tax was paid.
(3)Where the Commissioner is satisfied that tax has been overpaid, the Commissioner shall –
(a) apply the excess in reduction of any other tax due from the taxpayer under this Ordinance;
(b) apply the balance of the excess, if any, in reduction of any outstanding liability of the taxpayer to pay other taxes; and
(c) refund the remainder, if any, to the taxpayer.
(4) The Commissioner shall, within forty five days of receipt of a refund application under sub-section (1), serve on the person applying for the refund an order in writing of the decision after providing the taxpayer an opportunity of being heard.
(5) A person aggrieved by-
(a) an order passed under sub-section (4); or
(b) the failure of the Commissioner to pass an order under sub-section (4) within the time specified in that sub-section, may prefer an appeal under Part III of this Chapter.
Ref: Income Tax Ordinance, 2001

Labels: Taxation

posted @ 2:26 PM, ,

Indices Used To Measure Inflation

Labels: Economic and Business

posted @ 10:35 AM, ,

Economic and Business Updates - January 05 to 11, 2009
Monday, January 12, 2009

The government is to increase margins of oil marketing companies and petroleum dealers by 12.5 percent and 25 percent per liter respectively as both the stakeholder have given tough time to Islamabad after reduction in their profits.
The banking industry deposits witness a significant decline of Rs124 billion in the third quarter of 2008, despite relatively steep rise in weighted average return on deposits, say industry sources.
Banks approach the competition commission of Pakistan for condo nation of time period in filing of appeal against the commission’s order on imposition of penalty.
Global recession and emerging deflation in developed countries start affecting Pakistan’s exports, which are gradually declining since October. Though, exports of the country during the first five months (July-November, 2008) increased by 11.88 percent, trend shows the exports are sliding downwards.
In a policy shift, the government is to review the prices of petroleum products on a monthly basis, instead of fortnightly, aimed at bringing stability to the market and minimizing consumer’s problems, sources in the Finance Ministry disclose.
The Indian government imposes 12 percent cuties on cement import, which is aimed at curbing cement import from Pakistan, industry sources say.
Prime Minister Yousuf Raza Gilani directs the Ministry of Petroleum and Natural Resources to arrange uninterrupted supply of oil and gas to IPPs for optimal supply of power.
RICE exports cross record $1.18 billion mark in the first six months of the current fiscal year, says chairman of Rice Exports Association Abdur Rahim Janoo.
The Finance Ministry has achieved all IMF targets including two per cent fiscal deficit by end of December, 2008, and tax collection is likely to touch 10.5 percent of GDP as discussed and agreed, says adviser to PM on Finance Shaukat Tarin.
The Asian Development Bank underlines the need for improving international controls and internal audit in both Punjab health department and at district government level for improving transparency and accountability in the use of public resources and ensure that fund leakage in minimized.
The Utility Stores Corporation starts selling urea fertilizer to check black marketing and facilitate the growers and farmers community.
The Ministry of Industries is grilled by the Economic Coordination Committee of the Cabinet for seeking company specific incentives through revised letter of Intent (LOI) after federal Board of Revenue raised eyebrows on the issue, say official sources.
Finance Minister concedes that monetary overhanging from the unprecedented government borrowing from the State Bank of Pakistan for budgetary support will continue to frustrate the decline in imported inflation.
Phutti arrivals into ginneries rose by 6.91 percent at 9.745 million bales in the fortnight ended December 31, 2008 when compared with 9.115 million bales in the same period last year.
Source: Dawn - Economic and Business Review dated 12-01-2009

Labels: Economic and Business

posted @ 10:49 AM, ,

Export Proceeds - Accounting Treatment
Saturday, January 10, 2009

Initial Recognition: A foreign currency translation shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
Recognition of Exchange Difference: Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in the Profit and Loss in the period in which they arise.
(Ref: Para 21 and 28 of International Accounting Standard IAS-21)
In the context of above mentioned paragraphs initially export sales would be booked at the spot rate and susequently effect of any change in exchange rate would be charged to Profit and Loss Account.
Accounting Entries:
Initial Recognition:
(Dr) Export Sales Receivables----------1,000
(Cr) Export Sales ----------------------1,000
Subsequently
(Dr) Bank Account---------------------980
(Dr) Exchange Rate Loss----------------20
(Cr) Export Sales Receivalbes----------1,000

Labels: accounting

posted @ 3:29 PM, ,

Feasiblity Study and Business Plan

Feasibility Studies:In order to make wise investments in a marketplace experiencing increasing levels of risk, companies are turning to feasibility studies to determine if they should offer new products, services or undertake a new business endeavor. The purpose of a feasibility study is to determine if a business opportunity is possible, practical and viable. When faced with a business opportunity, many optimistic people tend to focus on just the positive aspects. A feasibility study enables a realistic view at both the positive and negative aspects of the opportunity. A feasibility study is an important tool for making the right decisions. A wrong decision often leads to business failure. For example, only 50% of start-ups are still in business after 18 months and only 20% are in business after 5 years.
Feasibility studies are useful when starting a new business or identifying a new opportunity for an existing business. Ideally, the feasibility study process involves making rational decisions about a number of enduring characteristics of a project, including:

• Definition of the project;
• Current market segmentation;
• Projected growth in each market segment;
• Current market offerings;
• Customer profile(s);
• Estimation of customers/revenues;
• Determination of competitive differentiation and advantage(s);
• Vision/mission statement;
• Definition of proposed operations/management structure and management methods; and
  Financing and projected cash flows.

Pre Feasibility Studies: In large (and usually joint venture or multinational) projects, a preliminary study undertaken to determine if it would be worthwhile to proceed to the feasibility study stage.
Business Plan is a document that summarizes the operational and financial objectives of a business and contains the detailed plans and budgets showing how the objectives are to be realized.
Because the business plan contains detailed financial projections, forecasts about your business's performance, and a marketing plan, it's an incredibly useful tool for business planning. For anyone starting a business, it's a vital first step.
The Feasibility Study vs. the Business Plan
Groups often confuse the role of two of the tools used by groups in the project development process; the feasibility study and the business plan. Various components are common to both the feasibility study and the business plan. Assuming positive feasibility study results, some but not all of the information developed in the feasibility study will be incorporated into the business plan. The business plan also contains aspects that were not included in the feasibility study. It would, therefore, be useful to clarify the differences between the two.
The feasibility study is conducted during the deliberation phase of the project development cycle prior to obtaining project financing. It is an analytical tool that includes several scenarios for the decision-makers of the group to utilize in determining if they should continue the project. If, after completion of the feasibility study, the group decides to not proceed, there is no need to undertake the process of creating a business plan.
If the group decides to proceed, they construct a business plan. The business plan is the design for project implementation and, as its name implies, presents the guideline for the project plan. Its purpose is to serve as a blueprint for the group's responses during project operations.
Usually, the business plan contains less emphasis on differing scenarios than the feasibility study. Typically, it elaborates the scenario shown by the feasibility study to be most promising. Since the concept has been shown to be viable in the feasibility study, the business plan is much more focused on what action steps will be taken during and after project implementation.
The business plan is created later in the development process than the feasibility study. By this time project details, which required assumptions for the feasibility study, have been decided. Standard business plans include details such as key management personnel, business location, the financial package, product flow, and possible customers.
Since the feasibility study presents an independent review of the project, persons from outside of the group normally complete it. In contrast, he group typically develops their business plan internally. The group may revise the plan with input from bankers and investors, as the financial situation of the project becomes clearer.
Another difference between the two, although not as important for project development considerations, is that while the feasibility study is only applicable for the developmental stage of a project, businesses continue to use, and revise their business plans after a project has been implemented.
To summarize, a business plan shows the group's intended response to the critical issues revealed in the feasibility study. As the feasibility study refines the group's initial ideas, the business plan uses information from the study to further prepare the project for operation.

Labels: finance

posted @ 10:24 AM, ,

Economic and Business Review - Last week
Monday, January 5, 2009

THE National Investment Trust (NIT) formally launches Rs20 billion NIT state Enterprise Fund (NIT-SEF).
State Bank of Pakistan issues new guidelines for home remittances-related agreements of exchange companies with foreign entities.
PAKISTAN announces five percent tariff reduction in the existing customs duty on import of around 4,803 items from Saarc member countries Srilanka, Bangladesh, Bhutan, Nepal and Maldives under the Trade Liberalisation Programme agreed in South Asia Free Trade Area (Safta) agreement.
PAKISTAN will have to face the worst load-shedding during the first two weeks of January amid dried up water resources due to canal closures for the purpose of desilting, say sources in Pepco.
THE procurement price of wheat in the domestic market is higher than the prevailing price in the international market, says Mr. Shahid, additional secretary, ministry of food and agriculture.
PAKISTAN is to receive $500 million tranche during this quarter (Jan-March), says Adviser to PM on Finance Shaukat Tareen.
PAKISTAN and Iran fail to reach accord on gas price on the Iran-Pakistan-India (IPI) gas line project during talks held in Tehran.
Quetta Electric Supply Company (Quesco) announces 50 percent cut in power supply to 13 towns and cities of Balochistan from January 1.
THE government approves an average increase of 7.5 percent in gas prices, but rejects the oil and gas Regulatory Authority’s proposal to cut petrol price.
State Bank Provides 90 days waiver for availing financing under export finance scheme (EPS) to all exporters whose export proceeds are overdue till date of issuance of the new circular.
THE government allows export of live animals against foreign currency after a squabble between the commerce ministry and the newly created ministry of live stock and dairy development, it is learnt.
IRAN is to build a dedicated 1000 MW capacity gas based power plant on its border to export electricity to Pakistan, says Minister for Water and Power Raja Pervez Ashraf.
THE Economic Coordination Committee (ECC) of the cabinet, meeting under the chairmanship of adviser to prime minister on finance Shaukat Tareen, takes serious notice of no reduction in commodity prices despite drastic cut in oil and palm oil prices in the international market.
State Bank launches the Banking Sector Strategy (BSS) formulated for the next decade mainly carrying intensive banking reforms.
Source: Dawn - Economic and Business Review dated January 05, 2009

Labels: Economic and Business

posted @ 11:06 AM, ,

Penalty in case of Late Payment of Tax
Friday, January 2, 2009

Section 205. Additional tax of Income Tax Ordinance,2001 states that
(1) A person who fails to pay –
(a) any tax, excluding the advance tax under section 147 and additional tax under this section;
Clause (a) substituted by Finance Act, 2003 which previously read as follows :
(a) any tax, including any advance payment of tax under section 147;
(b) any penalty; or
(c) any amount referred to in section 140 or 141,
on or before the due date for payment shall be liable for additional tax at a rate equal to twelve per cent per annum on the tax, penalty or other amount unpaid computed for the period commencing on the date on which the tax, penalty or other amount was due and ending on the date on which it was paid.
Therefore, late payment by employer for tax deducted at source U/S. 149 would be treated under above mentioned provision of Income Tax Ordinance, 2001

Labels: Taxation

posted @ 5:33 PM, ,

Dismentalling of Building or Asset

As per Para 16 of IAS - 16 (Property, Plant and Equipment)
The cost of an item of property, plant and equipment comprises:
(a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
(c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
As per Para 17 (b) of IAS - 16 one of the examples of Directly attributable costs are the costs of site preparation.
Therefore, dismentalling charges can be capitalised and can be cosidered as cost of acquisition of property in case another structure is commissioned. Otherwise there is no harm to charge the expense as repair and maintenance.

Labels: accounting

posted @ 3:14 PM, ,

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