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Check your Islamic Date of Birth
Friday, February 27, 2009

Click here! to check your islamic date of birth.

Labels: Islamic Date of Birth

posted @ 6:00 PM, ,

TR-31: Annuity Method of Depreciation

1. The annuity method is a compounded interest method whereby the depreciation is calculated based on the assumption that depreciation plus the normal cost of capital to finance the assets are constant over the life of the assets. This results in lower depreciation charges in the earlier years of the assets life and higher charges in the later years.
2. Although IAS 16 ‘Property, Plant and Equipment’ does neither expressly prohibit the annuity method nor mentions it as a permissible method, it states that the depreciation method should reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity (paragraph 60 of IAS 16). Therefore, depreciation should reflect the actual diminution of the value of the asset or the direct revenue streams arising from such assets duly ignoring indirect and inconsistent revenues and other associated costs which can, however, not be considered to be a part of the pattern of flow of economic benefits from such assets. This implies the straight-line method or the reducing balance method to be more appropriate for most of the leasing assets.
3. Further it needs to be noted that in case of applicability of annuity method of depreciation, the depreciation charged in the initial years is on the lower side and accordingly, there rises an inevitable risk that the carrying value of such assets would exceed their fair values, which might create accounting issues in future with regard to impairment testing in line with IAS -36 ‘ .
4. In view of the aforesaid, the Committee is of the considered opinion that annuity method of depreciation under IFRS is not an appropriate method of depreciation particularly for ssets given on operating lease for a determined period.
   

Ref: Recommendation are made in 204th meeting of the ICAP Council – January 23, 2009

Labels: accounting, Depreciation method, ICAP

posted @ 11:48 AM, ,

Finance Job in SPEC

Job description: Group Finance Manager

• Responsible for the accounting and finance functions of the company.
• Design and preparation of various MIS reports for monitoring financial performance.
• Responsible for year end financial reporting and coordination with external and internal auditors.
• To prepare financial reports for senior management

To see detail of this job and other jobs click here!

Labels: Jobs

posted @ 11:13 AM, ,

Know Your Customers:
Thursday, February 26, 2009

A disappointed salesman of ABC Cola returns from his Middle East assignment.A friend asked, "Why weren't you successful with the Arabs?"The salesman explained "When I got posted in the Middle East , I was very confident that I would make a good sales pitch as Cola is virtually unknown there. But, I had a problem I didn't know to speak Arabic. So, I planned to convey the message through three posters...

Labels: Jokes

posted @ 5:21 PM, ,

Tax Treatment of Salary

Case from mszuberi_associates:

A Non Profit organization not deducted the tax from its' employees salary for several years.

Queries:

• Who is responsible? Organization, Employee, Or both?
• what is the panalty under Income Tax ordinance, 2001 and who would bear it.

Comment:

Section 149, Salary, of Division III, Deduction of Tax at Source of the Income Tax Ordinance, 2001 states that;

Every employer paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made after making adjustment of tax withheld from employee under other heads and tax credit admissible under section 61, 62, 63 and 64 during the tax year after obtaining documentary evidence, as may be necessary, for
(i) tax withheld from the employee under this Ordinance during the tax year;
(ii) any excess deduction or deficiency arising out of any previous deduction; or
(iii) failure to make deduction during the year;

Sub Section (c) of Section 21 Decduction not allowed states that no deduction shall be allowed in computing the income of a person under head of income from business if that person any salary, rent, brokerage or commission, profit on debt, payment to non-resident, payment for services or fee paid by the person from which the person is required to deduct tax under Division III of Part V of Chapter X or section 233 of chapter XII, 1[unless] the person has 2[paid or] deducted and paid the tax as required by Division IV of Part V of Chapter X;

Conclusion:

According to above provisions of Income Tax Ordinance, 2001 it is clear that Organization (whether profitable or non profitable) is requied to deduct tax on salary at the time of payment and if it will not do so then its expense would be not allowed as admissible expense.

Labels: Query, Salary income, Taxation

posted @ 11:04 AM, ,

Mark up Rate Subsidy for Spinning Sector
Wednesday, February 25, 2009

Finance Division, Government of Pakistan has announced some modifications in mark up rate subsidy of 3% to spinning mills. Following amendments have been made in the Mark-up Rate Subsidy Scheme for Spinning Sector with immediate effect;

1. The period of mark up rate subsidy has been enhanced from one year to two years from 1st July 2007 to 30th June 2009.


2. The subsidy for the period from January 01, 2008 to December 31, 2008 shall be paid in March 2009.


3. Subsidy for six months period ending on June 30, 2009 (from 01-01-2009 to 30-06-2009) shall be paid in July 2009 subject to necessary budgetary allocations for the FY 2009-10.


4. Those spinning mills that could not avail subsidy for the first six months ending on December 31, 2007 due to their inability to seek settlement of their overdue loan installments or any other reason may also file claims separately to their banks for availing 3% mark up subsidy of said period in March 2009, provided their default has since been settled.


5. Banks / DFIs can pay the amount of subsidy to the eligible borrowers of spinning sector, to be calculated keeping in view the guidelines given in MFD Circular No. 06 dated October 30, 2007 as well as above modifications.


6. After making payments of 3% mark up rate subsidy, banks / DFIs can approach the concerned offices of SBP-BSC (Bank) for reimbursement of the same, along-with duly filled in application form on the Revised Format.


7. Banks/DFIs must ensure that all eligible cases are submitted to the respective offices of SBP-BSC (Bank) during the period prescribed for payment of subsidy.


8. No subsidy claim shall be entertained after 31st March 2009 and 31st July 2009 for the respective periods of subsidy

Labels: Mark up subsidy, SBP, Spinning

posted @ 3:51 PM, ,

Pakistan's Economic Review Jan-Jul FY-09

Inflation Declining but Still High:

• Inflation has started to decline slowly and Jul-Jan inflation was at 23.9% against 24.4 % during first six months of the current fiscal year, although it was 8.6% in the corresponding period last year.
• Food inflation in first seven months of current fiscal year came down to 29.8% while it was 12.5% last year.
• Non food inflation for seven months equaled 19.2% although it was mere 5.7 % last year.
• Non food non energy inflation in seven months of FY-09 reached 17.6% as against 6.7% for the corresponding period last year.
• Inflation is still above government’s target of 12%.

Money Market Review:

• SBP announced monetary policy statement (MPS) in January 2009 keeping the discount rate unchanged.
• There is an immense speculation that Central Bank might cut discount rate in coming policy statement.
• The cut off rates of T-Bills have started coming down which could be a gesture from Central Bank for rate slash and cut off rate for one year T-Bill has come below 14% as well.
• SBP accepted Rs 20 billion against participation of Rs 56 billion.
• PIBs cut off rates recorded improvement in all tenors comparatively from last auction.

Trade Deficit crossed $10 Billion mark:

• Trade deficit crossed whopping $10 billion mark and seven months deficit widened to $10.727 billion in FY-09 showing an increase of 3.5% from last year’s $10.357 billion in the same period.
• Total Exports reached to $10.934 billion showing an increase of 8.02% mainly constituted of rice, chemicals and cement.
• Imports for seven months reached to $21.661 billion,an increase of 5.77%.
• Monthly exports for January reached to $1.36 billion while imports reached $2.528 billion making monthly deficit of $1.22 billion, an improvement from last year’s deficit of $2.064 billion.
• Home remittances for January were $637 million showing a decline from December’s massive $674 million, which was the highest level in last five years.
• The aggregate remittances in first seven months of fiscal year 2009 have totaled to $4.277 and it has been one of the biggest sources after exports, to earn foreign exchange for bridging gap between foreign currency inflows and outflows.

Future Outlook:

• The economy has finally started to show signs of relative stability by achieving the first set of targets set by International Monetary Fund, which happens to be the prerequisite for the second tranche from IMF.
• As a matter of direct consequence of IMF’s revenue target the government is reluctant to cut the oil prices further and it has further decided to review petroleum prices on
  monthly basis instead of fortnightly basis.
• All signs are that domestic inflation would be difficult to tame given relatively high POL and Food prices.
• While country’s burgeoning trade and current account deficits have shown some signs of improvements, it is imperative that the foreign exchange numbers are still very much against the country.
• The interest rates might go down in near future owing to tremendous pressure from business community provided that in addition to high interest rates, slowing exports orders have already made things worse for corporate.
• Country’s foreign exchange position would mainly depend on IMF as Pakistan has already approached IMF for $4.00 billion finance in addition to $7.5 billion stand by facility.
• Exchange rate would remain volatile in absence of any major investments from abroad.

Ref: Treasury, National Bank of Pakistan

Labels: Economic Overview, Economy and Business, Pakistan Economy

posted @ 12:41 PM, ,

KUWAIT - Economic Overview

Today is 48th National Day of the state of Kuwait. This day late Sheikh Abdullah Al salam Al sabah, the eleventh ruler of Kuwait, took over the reins of Kuwait. Some of the facts of the nation is as follow;

Independence Day: 19th June, 1961 (From UK)

Economic overview:
Kuwait is a small, rich, relatively open economy with self-reported crude oil reserves of about 104 billion barrels - 8% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 80% of government income.

• GDP (purchasing power parity): $157.9 billion (2008 est.)
• GDP - real growth rate: 8.1% (2008 est.)
• GDP - per capita (PPP): $60,800 (2008 est.)
• Unemployment rate: 2.2% (2004 est.)
• Budget: revenues: $113.3 billion expenditures: $63.55 billion (2008 est.)
• Public debt: 7.2% of GDP (2008 est.)
• Inflation rate (consumer prices): 11.7% (2008 est.)
• Central bank discount rate: 6.25% (31 December 2007)
• Commercial bank prime lending rate: 8.54% (31 December 2007)
• Industries: petroleum, petrochemicals, cement, shipbuilding and repair, water desalination, food processing, construction materials
• Oil - production: 2.613 million bbl/day (2007 est.)
• Oil - consumption: 334,700 bbl/day (2006 est.)
• Oil - exports: 2.356 million bbl/day (2005)
• Oil - imports: 8,022 bbl/day (2005)
• Oil - proved reserves: 104 billion bbl (1 January 2008 est.)
• Natural gas - production: 12.5 billion cu m (2006 est.)
• Natural gas - consumption: 12.5 billion cu m (2006 est.)
• Natural gas - proved reserves: 1.586 trillion cu m (1 January 2008 est.)
• Current account balance: $65.21 billion (2008 est.)
• Reserves of foreign exchange and gold: $10.64 billion (31 December 2008 est.)

Labels: Economic Overview, Economy and Business, Kuwait

posted @ 9:22 AM, ,

Export Finance Scheme
Tuesday, February 24, 2009

State Bank of Pakistan (SBP) has extended the period of refinance facilities under Part-I of the Scheme. Salient features are as follows;

• Period has been extended from 180 days to 270 days.


• Fresh finances facility will be available for 270 days to the exporters, however, banks will have to adjust the finance within a maximum period of 180 days, and allow rollover for an additional period of 90 days, provided shipment has been made by the exporters within a period of 180 days after withdrawal of the finance.


• In case of export finance already availed by exporters under Part-I of the Export Finance Scheme, banks may allow an additional period upto 90 days for repayment of export finance availed of for export of all eligible commodities, except where export proceeds have been realized earlier by the exporters.


• The exporters will get finance upto 85% of the value of firm export order/contract/letter of credit and will be required to make shipments equivalent to 117% against refinance availed for 270 days from the export of eligible commodities under Part-I (pre-shipment).


• In case of post shipment, exporters will be eligible to avail 85% refinance against the respective shipment.


• In case an exporter prefers to remain in the old system, he can avail export refinance facility for a maximum period of 180 days under existing terms and conditions.

To see the SBP circular click here!

Labels: Export Finance Scheme, Pakistan Economy, SBP

posted @ 1:22 PM, ,

17th International Islamic Finance Forum

The 17th International Islamic Finance Forum is being held in Dubai from April 26th to 30th, 2009 at JW Mariott Hotel, Dubai, UAE in which distinguished international and regional speakers would participate.

ICAP members would get 25% discount on the original price.

CPD Credit ... 27 hours

For registration please visit http://www.iiff.com/

Labels: Islamic Finance

posted @ 9:50 AM, ,

Interest Expense Vs Interest Income
Monday, February 23, 2009

Case: (from Khurram Iqbal - iqbal@rakinvest.ae )

Loan taken by A from B Euro 1,000
Quarterly interest payable to B by A on above loan Euro 100

Loan transferred to C by A Euro 1,000
Quarterly interest payable by C to A Euro 100

Note: At the end of the maturity of above loan A will be liable to payback the full
principal loan amount to B after recovered from C.

Question:
How “A” treats interest expense in its books?

Comment:

• Interest payable to "B" would be interest expense of "A" whereas
• Interest receivable from "C" would be interest income of "A".

These two separate transaction either can be net off against each other or show separtely according to nature and requirement of law and regulation.

Labels: accounting, interest expense

posted @ 4:44 PM, ,

Finance Jobs in FFC

Following jobs are available in Fauji Fertilizer Company Limited (FFC).

Job Description # 1 : Finance Executive
Qualification : Member of Institute of Chartered Accountant of Pakistan
Experience: 2-3 years post qualification would be preferred
Age Limite: Upto 30 years.

Job Description # 2 : Finance Officer
Qualification : CA Finalist
Experience: Minimum 4 years professional / industrial
Age Limite: Upto 30 years.

Interested candidates can apply online on www.ffc.com.pk latest by 03-03-09.
Ref: Dawn dated 22-03-09

Labels: Jobs

posted @ 9:45 AM, ,

Economic and Business Updates - February 16 to 22, 2009

• The net borrowing of the federal government soar to Rs.324.00 billion during July-February of the current fiscal as compared to Rs.249.00 billion during the same period of FY08.
• A deficit of $0.40 billion in service trade has been recorded during the seven months of the current fiscal year mainly due to larger payment on account of transportation, construction, financial and royalties.
• Export of non textile products soars by 24.50% and oil importer bill surges by 28.86% in the first seventh month over the same period of last year, reveals the Federal Bureau of Statistics.
• The current account deficit gets reduced by 25.0% during January 2009 due to increase in services exports and decline in global commodity prices.
• Net foreign investment declines by 13.00% during July–January of the current fiscal year mainly due to massive outflow from portfolio investment due to poor law and order situation and political instability.
• In the auction of Pakistan Investment Bonds after 2004 due to expected cut in interest rate in April, the state bank receives Rs.55.99 billion worth bids against the targets of Rs.20.00 billion for the auction of its various long term investment bonds.
• Pakistan pays $517.00 million against 5 year Euro Bond on maturity. The payment included $500 million principal and $17.00 million interest.
• Pakistan repays $1.80 billion loan to international financiers and countries during the first six months of the current fiscal year.
• The government decides to float term finance certificates of Rs.98.00 billion to resolve the outstanding circular debt issue. The TFCs will be available on KIBOR + 1.75%.

Ref: Dawn - Economic and Business reviews dated 23-02-2009

Labels: Economy and Business, Pakistan Economy

posted @ 9:36 AM, ,

INTERNAL AUDITING SPECIALIST
Saturday, February 21, 2009

The Government of Punjab is preparing an Education Sector Reforms Program with the assistance of the World Bank to support and scale-up specific interventions to improve education outcomes. The program is potentially fast-disbursing with a focus on performance through a Disbursement Linked Indicator (DLI) matrix, and includes an essential TA component to meet DLIs.

REMUNERATION:

The remuneration attached to the post shall range between Rs.150,000 to Rs.180,000. The actual placement in the range shall depend on the qualifications and experience of the suitable candidate.

QUALIFICATIONS AND EXPERIENCE:

The Internal Auditing Specialist will have the following qualification criteria:

• Chartered Accountant and/or Certified Internal Auditor with at least 5 years post qualification experience in practice, industry and/or preferably in public sector (Mandatory Criterion);
• Hands-on expertise in managing the finances of complex, high-value projects;
• Experience of setting-up an internal audit function in an organization or considerable experience being head of the internal audit function.
• Knowledge and experience in government accounts;
• Operational knowledge of international and country financial and accounting management practices, including MIS applications;
• Familiarity with the requirements of modern financial management software systems;
  Sound knowledge of financial and accounting policies, rules and regulations;
• Administrative skills and a sound knowledge of project management competencies;
• An ability to work in English (reading, writing, speaking).
  

For detailed job profile and Terms of Reference (ToR), please visit http://pesrp.punjab.gov.pk .
Application with CV must be submitted to the address below by 25th February, 2009. Only shortlisted candidates shall be invited for the interview.

PROGRAMME DIRECTOR
Punjab Education Sector Reform Programme (PMIU-PESRP)
22-B, New Muslim Town, Lahore. Tel: 042-9232294

Labels: Jobs

posted @ 9:49 AM, ,

Job in Engro
Friday, February 20, 2009

Engro is looking for high caliber & progressive individual for a middle management position in its Internal Audit Department. Candidate to have at least 5-7 yrs of post-qualification experience, preferably in a large national/multinational organisatisation.

To apply for this job, please click here!

Labels: Jobs

posted @ 12:42 PM, ,

6th Schedule - Table of fees
Thursday, February 19, 2009

Securities and Exchange Commission of Pakistan has revised all fees related to registration of

• company having share / having not capital,
• increase in share capital
• any other relvant documents

through SRO 119(1)/2009. Click here! to see the table of fees to be paid to the registrar and the commission.

Labels: Compnay Law, SECP, Table of fees

posted @ 1:44 PM, ,

Major Withholding Taxes Agents
Wednesday, February 18, 2009

Prescribed Persons / Withholding Agent U/S Relevant Sections

Labels: CA Final Exam, Taxation, withholding tax agent

posted @ 4:41 PM, ,

Changes in Accounting Estimates
Tuesday, February 17, 2009

Query:
Useful life of the fixed asset can be revised?

Answer:
Para 32 of (International Accounting Standard) IAS-8, Accounting Policies, Changes in Accounting Estimates and Errors states that as a result of the uncertainties inherent in business activities, many items in financial statements cannot be measured with precision but can only be estimated. Estimation involves judgement based on the latest available, reliable information. For example, estimates may be required of:

• bad debts;
• inventory obsolescence;
• the fair value of financial assets or financial liabilities;
• the useful lives of, or expected pattern of consumption of the future economic benefits embodied in, depreciable assets; and
• warranty obligations.

Further, para 34 states that an estimate may need revision if changes occur in the circumstances on which the estiamtes was based or as a result of new information or more experience.

In the light of above management can revise the useful life of the asset as well.

Accounting Treatment:

1. To the extent that a change in an accounting estimates gives rise to changes in assets and liabilites, or relates to an item of equity, it shall berecognised by adjusting the carrying amount of the related assets, liability or equity item in period of the change.


2. The effect of a change in an accounting estimate, other than mentioned above, shall be recognised prospectively by including it in profit or loss in:

• the period of the change, if the change effects that period only; or
• the period of the change and future periods, if the change affects both.

Labels: accounting, changes in accounting estimates, IAS

posted @ 5:01 PM, ,

Tax accounting: Cash vs. Accrual

Query from Khurrum Shahzad, M.Com, ACMA, Head of Accounts Deptts. Rahim Baksh Group:

"A recreational club has received amounting Rs.2,000,000 on account of life membership of a person with family and charged 1,500/- on monthly basis. Can that club defer Rs.2,000,000 on different coming years rather than show as income of the year when it is received? Please advice from taxation point of view."

Answer:
Section 32. Method of accounting states that a company shall account for income chargeable to tax under the head “Income from Business” on an accrual basis, while other persons may account for such income on a cash or accrual basis.
Further, a person’s income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by such person (wether accrual or cash)

Section 33. Cash-basis accounting states that a person accounting for income chargeable to tax under the head “Income from Business” on a cash basis shall derive income when it is received and shall incur expenditure when it is paid.

Section 34. Accrual-basis accounting states that;

A person accounting for income chargeable to tax under the head “Income from Business” on an accrual basis shall derive income when it is due to the person and shall incur expenditure when it is payable by the person.

• Due to a person means when the person becomes entitled to receive it even if the time for discharge of the entitlement is postponed or the amount is payable by instalments.
• Payable by a person means when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy.

Taxable Income:

In the light of above provisions of income tax ordinance, 2001 that club must adopt accrual basis accounting (in case of company) and may adopt accrual basis accounting (in case of other person like AOP). On the basis of accrual accouting Rs.2,000,000/- would be treated as income when club is entitled to receive it irrespective the amount is postponed or payable in instalments.

Ref: Income Tax Ordinance, 2001

Labels: Taxation

posted @ 12:18 PM, ,

Economic and Business Updates - February 09 to 15, 2009
Monday, February 16, 2009

• Inflation has swelled as Sensitive Price Indicators surged by 23.66 percent on February 12 over the same week of last year, says the Federal Bureau of Statistics.


• The country’s trade deficit jumps to $10.727 billion in last seven months (July-January) of 2008-2009, with 3.5 percent increase against $10.357 billion of the corresponding period of last year.


• The Ministry of Industries and Production is preparing a summary proposing reduction in banks interest rates so that the industrial sector may revive.


• Remittances by over seas Pakistanis continue a rising trend as an amount of $4.27731 billion is received in the first seven months (July-January) of the fiscal year 2008-09, an increase of 18.05 percent over the same period of last year.


• The State Bank of Pakistan amends the regulation and fixes the personal loan and credit card limit at Rs1,000,000 for a single person and asks banks to obtain consumer credit report from CIB before allowing any consumer facility.


• The National Tafiff Commission imposes preliminary anti-dumping duty on polyester staple fibre imported from China at the rate of 10.44 percent on cost and freight value, and also reports it to the WTO, say sources in the Ministry of Commerce.


• Pakistan's poverty rate jumps from 23.9 percent to 37.55 percent in the course of three years after severe economic shocks hit Pakistan, says Planning Commission official.


• Pakistan State Oil pays Rs5 billion to oil refineries to enable them to place orders for fresh import of crude oil.


• The Japanese survey team concludes its feasibility report of the $872.316 million project for revival of the Karachi Circular Railway, paving the way for grant of loan by Japan in May2009.


• Pakistan State Oil says its oil purchases will not be disrupted by the central bank’s move to stop using foreign reserves to pay for oil imports, as it will seek funding from private and local banks.

Ref: Dawn, Business and Economic Review dated 16-02-2009

Labels: Economy and Business, Pakistan Economy

posted @ 12:08 PM, ,

Quit Smoking

The government has increased federal excise duty (FED) rate on various brands of cigarettes from February 14, 2009.The FED would be;

• 63.00% of the retail price on the locally produced cigarettes if their retail price exceeds Rs.17 per ten cigarettes.

• Rs. 3.54 per ten cigarettes plus 69.00% per incremental rupee or part thereof on locally produced cigarettes if their retail price exceeds Rs 8.29 per ten cigarettes, but does not exceed Rs.17

• Rs.3.54 per ten cigarettes on locally produced cigarettes, if their retail price does not exceed Rs 8.29 per ten cigarettes.

Labels: Economy and Business, Pakistan Economy

posted @ 10:17 AM, ,

SECP - Relaxation in accounting treatment for equity securties
Saturday, February 14, 2009

The SECP through SRO 150 (I) 2009 dated February 13, 2009, has granted relaxation in the accounting treatment for equity securities held by the companies under the head “Available for Sale” as required under International Accounting Standard ‘Financial Instrument: Recognition and Measurement (IAS 39). The relaxation is;

• The impairment loss if any recognized as on 31-12-2008 due to valuatin of listed equity investment held as "Available for sale" to quoted market prices of 31-12-2008 may be shown under the EQUITY.
• The amount taken to equity including any adjustment / effect for price movements during the quarter of calender year 2009 shall be taken to Profit and Loss account on quarterly basis during the calender ending on 31-12-2009.
• The amount taken to equity shall be treated as a charge to profit and loss account for the purpose of distribution as dividend.
• The above dispensation shall be available to all companies and mutual funds.
• All companies and mutual funds opting for the above treatment shall disclose prominently n the face of balance sheet, profit and loss accounta and director's reports

Labels: accounting

posted @ 10:08 AM, ,

Witholding tax on freight charges
Friday, February 13, 2009

According to section 153 (Payments for goods and services) of Income Tax Ordinance, 2001 every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person is required to deduct tax

• for the sale of goods;
• for the rendering of services;
• on the execution of a contract, other than a contract for the supply of goods or the rendering services

Payment to transporters on account of freight charges are covered under rendering of services. Every prescribed person is required to deduct withholding tax @ 2.00% as mentioned in 2(i) division III, part III of first schedule of Income Tax Ordinance, 2001.

Labels: Taxation

posted @ 2:57 PM, ,

SBP amends banking prudential regulations
Thursday, February 12, 2009

The State Bank of Pakistan has set new code for the obtaining of financial statement from borrowers with following changes in prudential regulations;

• Banks /DFIs are required to obtain copy of audited financial statement of every borrower, which is a limited company, or where the exposure limit exceeds Rs 10 million.


• Banks/DFIs may also accept a copy of financial statement duly audited/certified by a practising Cost and Management Accountant in case of a borrower other than a public company or a private company, which is a subsidiary of a public company.


• If the borrower is a public limited company and exposure exceeds Rs 500 million, banks/DFIs should obtain the financial statement duly audited by a firm of Chartered Accountants which has received satisfactory rating under the Quality Control Review (QCR) Program of the Institute of Chartered Accountants of Pakistan.


• Subsequently, if the firm's rating is downgraded in QCR program, then the financial statements of such borrowers are audited in the subsequent year by a firm having satisfactory rating under QCR.


• Banks/DFIs may waive the requirement of obtaining copy of financial statements when the exposure net of liquid assets does not exceed the limit of Rs 10 million.


• Financial statements signed by the borrower will suffice where the exposure is fully secured by liquid assets.


• This amendment in the regulation will be applicable after December 31, 2009.


• Banks/DFIs have been advised to communicate the contents of this circular to all of their existing borrowers, which are public limited companies and their limits exceed Rs 500 million so that they will submit the financial statements in accordance with the above instructions after December 31, 2009.

Labels: Banks, Economy and Business, Pakistan Economy

posted @ 9:40 AM, ,

Crises and its causes
Wednesday, February 11, 2009

Crises take different forms. They can be characterized by

• a large decline in consumer demand and investment by firms,


• higher unemployment,


• and a lower standard of living,


• uncertainty in financial markets,


• declines in the prices of stocks, bonds and, quite frequently, the value of the domestic currency.

Crises can originate in or affect the financial sector, and can lead to difficulties in banks and the payments system, causing damage to economic activity as well. A very severe crisis (economic and/or financial) could lead to recession, debt defaults, and what is known as a sudden stop: a deep recession and a reversal in the flow of international capital.

Crises in emerging markets can be caused by external or domestic factors. External causes comprise

• a collapse of export prices,


• a drastic increase in import prices,


• a shift in investor perceptions about risk that cause capital outflows,


• a large depreciation or devaluation of the currency of a close trading partner,


• a retrenchment of local activities of international banks,


• a sharp curtailment of credit or increase in interest rates in world markets.

Domestic causes include

• excessive monetary creation,


• unsustainable fiscal deficits,


• an overvalued domestic currency,


• political instability,


• and natural disasters.

External shocks can have a multiplying effect on vulnerable countries, which tend to have relatively high levels of private or public debt, weak financial systems, and a history of instability and inappropriate policies.

Labels: Economy and Business, Financial crisis

posted @ 11:49 AM, ,

IRAN - Economic Overview
Tuesday, February 10, 2009

Today is the 30th anniversary of the Islamic Revolution of Iran. Iran's economy is marked by an inefficient state sector, reliance on the oil sector (which provides 85% of government revenues), and statist policies that create major distortions throughout. Most economic activity is controlled by the state. Private sector activity is typically small-scale workshops, farming, and services. The recent drop in oil prices will be the most significant impact of the global financial crisis on Iran, but high oil prices in recent years have enabled Iran to amass nearly $70 billion in foreign exchange reserves. Some of the other facts are as under;

• Foreign exchnage reserve = $ 96.56 billion (as at 31-12-08, est.)
• External debt = $21.77 billion (31 December 2008 est.)
• Current account balance = $27.47 billion (2008 est.)
• Inflation rate (consumer prices) = 28%
• Banks prime lending rates = 12%
• Natural gas reserve = 26.85 trillion cu m (1 January 2008 est.)
• Oil reserve = 138.4 billion bbl based on Iranian claims (1 January 2008 est.)

Labels: Economy and Business, International

posted @ 1:26 PM, ,

IFRS Diploma by ICAP
Monday, February 9, 2009

Institute of Chartered Accountants (ICAP) has launched the program “Diploma in IFRS”. First examination will be held in the third week of June 2009. To obtain this Diploma, a candidate has to pass two exams. First examination will be based on “Multiple Choice Questions” whereas second examination will be scenario based. As you are aware, the SECP and the Institute have agreed to take steps for full adoption of IFRS for all listed companies by end of 2009. Also, with the adoption of IFRS by more than 100 countries around the world, the IFRS are expected to become single set of global financial reporting standards. Therefore, we foresee substantial demand for IFRS professionals, both within and outside Pakistan . This program is a great opportunity for anyone who wishes to specialize in IFRS.

To see in detail please visit here!

Labels: CA Final Exam, IFRS

posted @ 12:14 PM, ,

Economic and Business Updates - February 02 to 08, 2009

• The Asian Development Bank will provide $1.5 billion loan to Pakistan for undertaking development projects in different sectors during the current calendar year.


• The State Bank of Pakistan agrees to the Securities and Exchange Commission of Pakistan’s recommendations to allow financial institutions to amortise the deficit upon revaluation listed equity in vestments, TFCs and Sukuk, it is reliably learnt.


• An estimated 150,000 workers have been laid off by auto vendors and assemblers in the last few months in the wake of persistent fall in sales of cars.


• The government will refund research and development (R&D) claims to knitwear and woven-garments exporters next week and also three percent interest subsidy on loans for the spinning industry at the earliest.


• Pakistan's public debt is seen rising by Rs2 trillion by the end of 2008-09, the highest ever increase in a single year.


• The Central Directorate of National Savings announces profit of Rs1400 per month on an amount of 100,000 on its various schemes.


• The government releases Rs2 billion price differential claims of the oil Marketing Companies to ensure the availability of the produce in the country.


• Japan is inviting key nations to a conference to drum up aid to stabilize Pakistan in what it hopes will be one of US Secretary of State Hillary Clinton’s first foreign trips, says senior US official.

Ref: Daily Dawn - Business and Economic Review dated 09-02-2009

Labels: Economy and Business, Pakistan Economy

posted @ 11:18 AM, ,

Gratuity Rules
Saturday, February 7, 2009

According to standing order no. 12 of The West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, where a workman resigns from service or his services are terminated by the employer, for any reason other than misconduct, he shall, in addition to any other benefit to which he may be entitled in accordance with the terms of his employment or any custom, usage or any settlement or an award of a Labour Court under the Industrial Relations Ordinance, 1969 (XXIII of 1969), be paid gratuity equivalent to thirty days, wages, calculated on the basis of the wages admissible to him in the last month of service if he is a fixed-rated workman or the highest pay drawn by him during the last twelve months if he is a piece-rated workman, for every completed year of service or any part thereof in excess of six months

Labels: accounting, Commercial rules

posted @ 11:21 AM, ,

Government's action required by IMF
Tuesday, February 3, 2009

Measures, Government of Pakistan's actions required by IMF in the memorandum of economic and financial policies with timelines are as follows;

• To achieve the FY09 deficit target, the government will increase tax revenue by 0.6 percentage of GDP reduce non-interest current expenditure by about 11/2 percentage point of GDP, mainly through the elimination of oil subsidies by December 2008 and electricity subsidies by June 2009.


• At the same time, domestically finance development spending will be reduce by about 1 percentage point of GDP through better project prioritization (By End Jun, 2009)

Borrowing from SBP:

• SBP finance of the budge will be reduced to Rs.165.00 billion on a cumulative basis (In FY09)

Increase tax revenue:

• An integrated tax administration organization on a functional basis will be established at the federal Board Revenue (FBR) (During rest of FY09)


• Audits will be re introduced as part of a risk-based audit strategy (By End – Dec,2008)


• A full description of the required reforms, together with an action plan will be provided to the IMF, following a planned seminar to review tax policy and administration (By End – Dec,2008)


• Preparation of draft legislation for the VAT for public debate (By End-2009)


• Harmonize the income tax and GST laws, increase excises on tobacco, and reduce exemptions (FY10 budget)

Spending for social safety net:

• An increase in social safety net spending from budgeted 0.6 percentage points of GDP to 0.9 percent of GDP (During FY09)


• In close cooperation with the World Bank, preparation of a strategy and a time-bound action plan to put in place a comprehensive and well-targeted social safety net (By End – Mar, 2009)

Single treasury account:

• Existing funds held outside the SBP account will be transferred to the SBP account (By End – Dec, 2009)

Circular debt:

• Preparation of a plan for eliminating the inter – corporate circular dept within the fiscal deficit target (By End – Mar,2009)

Electricity tariff adjustment:

• Electricity tariff differential subsidies will be fully eliminated. In this regard, the average base tariff will be further increased during FY09 according to a schedule to be agreed with the world Bank (By End-Dec,2009)

Fuel price adjustment:

• Moreover, fuel prices will continue to be adjusted to pass through changes in international prices. (Continuous)

FY10 fiscal deficit:

• A further reduction in the fiscal deficit to 3.3 percent of GDP I s envisaged for 2009/10 (During 2009)

Fiscal consolidation in medium term:

• Reduction in the fiscal deficit to 2-2.50 percent of GDP (by FY2013)


• Increasing tax revenue by at least 3.50 percentage points of GDP (by FY2013)

Ref: Monetary policy statement Jan-Mar, 2009 (SBP)

Labels: Economy and Business, Pakistan Economy

posted @ 5:44 PM, ,

SBP's actions required by IMF

There are some SBP's actions required by IMF in memorandum of economic and financial policies. Summary of those measures , required actions and timelines are as follows;

• Consideration of a further increase in the discount rate at the time of the monetary policy statement for H2-FY09 (End Juanuary, 2009).


• An earlier increase in discount rate if the actual reserve for end November and end December, 2008 fall short of the program monthly floors on the SBP’s net foreign assets (During Nov-Jan, 2009)

Operational independence of SBP:

• Formation of an interagency committee for review and recommend charges in the legal provisions relating to the operational independence of the SBP (By Mid – Nov, 2008)

Amendments in BCO:

• Submission of necessary amendments in the Banking companies ordinance to the parliament for the strengthening SBP’s ability to (i) change management in banks: (ii) impose losses on shareholders by writing down their capital (iii) intervene and take ownership of banks: (iv) appoint administrators to operate banks: and (v) restructure banks.(By End – Jun, 2009)

Oil Support to market:

• Phasing out the SBP’s provision of the foreign exchange for oil imports according to the following schedule: Furnace oil (By Feb 1,2009) Diesel and other refined products (By Aug 1,2009) Crude oil (By Feb 1,2010)

Liquidity management:

• Review of the current procedures for liquidity management, and adoption and publicization of a transparent liquidity management framework, including the announcement of an explicit corridor for money market interest rates (By End –Jul, 2009)

Auction calendar:

• Issuance of a T-bills auction calendar for ever quarter (One month in advance)

Advance import payments:

• Elimination of the exchange restriction on advance import payments against letters of credit (subject to a marked improvement in the balance of payments position) (By End –Jan, 2010)

Plan for problem banks:

• Preparation of a contingency plan deal with problem private banks, containing criteria for SBP liquidity support assessment of bank problems and intervention procedures (By End –Dec, 2008)

Labels: Economy and Business, Pakistan Economy

posted @ 5:16 PM, ,

Economic and Business Updates - January 26 to 01, 2009
Monday, February 2, 2009

• PRIME Minister Yousuf Raza Gilani invites foreign businessmen to invest in Pakistan saying a successful elected government is in place to ensure safe business environment for investors.


• THE Competition Commission of Pakistan (CCP) is sues notices to four banks for advertising term/time deposit exaggerated and incorrect profit rates ranging between 16-18 percent.


• THE Rice Exporters Association of Pakistan (Reap) takes a strong exception to the floating of fourth purchase tender of rice by the Trading Corporation of Pakistan (ICP). The tender will open in the second week of this month.


• BANKS profit is likely to witness increase of some 20 percent in 2008, with the State Bank of Pakistan’s move to allow them to avail 30 percent benefit of the Forecast Sale Value (FSV) of collateral for calculation provisioning requirement, say industry sources.


• THE trend of retrenchment in Karachi’s industrial areas has deepened as around 250,000 employees, mostly contractual and daily wages, have lost their jobs over the last six months following economic downturn hitting industrial production.


• PAKISTAN signs an agreement with the World Bank for a soft loan of $500 million for launching various programmes for poverty alleviation.


• THE Federal Board of Revenue abolishes regulatory duty (RD), ranging between 15 and 30 percent on imports of 19 types of capital goods used for establishment of wholesale trade centers or retail chain stores. This is subject to conditions that companies have to import the goods for their own use and not for sale.


• THE State Bank of Pakistan allows banks to avail 30 percent benefit of Force Sales Value (FSV) of collateral for calculating provisioning requirement.


• THE Private Power and Infrastructure Board (PPIB) receive three bids for 964 MW of cumulative capacity, translating into around $1.16bn of investment.


• INDIAN exporters cancel import order of about 25,000 tons of cement from Pakistan and set a condition for $7 per ton reduction in its price, disclose industry sources.


• PRESIDENT Zardari asks the government to consider the public private partnership formula to revive Pakistan Steel Mills and to turn it into a profitable enterprise.


• THE Zarai Taraqiati Bank Limited (ZTBL) conveys to the local tractor manufacturers that their demand drafts worth millions of rupees will not be cleared until one of the blue eyed officials of the bank’s subsidiary is given dealership, sources in the bank said.


• THE government is set to cut Rs20 billion from the allocated amount of Rs125 billion for development projects in food and agriculture sector in an effort to meet its 4.2 percent fiscal deficit commitment with International Monetary Fund (IMF).
  

Ref: Dawn, Business and economic review dated 02-02-09

Labels: Economy and Business, Pakistan Economy

posted @ 11:27 AM, ,

Monetary Policy Statement - SBP

Some of the salient features of Monetary Policy are as follows;

• The SBP has decided to keep the policy discount rate unchanged at 15 percent.


• Prior announcement of the auction calendar for Treasury Bills (T-bills) and Pakistan Investment Bonds (PIBs) and a volume based approach to determine the auction result.


• Ministry of Finance will henceforth be responsible for deciding the cut off yields of the primary auctions of T-bills and PIBs on the above premise.


• SBP will continue to manage the operational aspect of the auctions and there will be no change in the process as far as the market is concerned.


• To introduce limits on the direct government borrowings from the SBP and along with a plan to eliminate the same in a phased manner over next several years.


• To facilitate the banks in providing finance to the exporters and support the industry SBP has decided to further enhance banks’ limits both under EFS and LTFF Schemes by Rs35 billion.


• In order to support long term investment in new plant & machinery, the limits under LTFF have also been enhanced by Rs. 10 billion from Rs9.5 billion to Rs19.5 billion.


• In addition it has been decided that the SBP will issue Monetary Policy Statement (MPS) on quarterly basis. This is a significant step in current fast evolving economic environment and will enhance the effectiveness of monetary policy transmission.


• The MPS for the next quarter will be issued by the end of April 2009

To view complete Monetary Policy please click here!

Labels: Economy and Business, Pakistan Economy

posted @ 10:45 AM, ,

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