Financial Risk Manager

Ways of Financial and Risk Management

Check your Islamic Date of Birth

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Click here! to check your islamic date of birth.

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posted @ 6:00 PM, ,

TR-31: Annuity Method of Depreciation

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The Issue:
"Whether Annuity Method of Depreciation is an appropriate method of depreciation under IFRS."
Technical Committee Recommendation:
  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

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posted @ 11:48 AM, ,

Finance Job in SPEC

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Job description: Group Finance Manager

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

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posted @ 11:13 AM, ,

Know Your Customers:

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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...

First poster: A man lying in the hot desert sand...totally exhausted and fainting. Second poster: The man is drinking our Cola.Third poster: Our man is now totally refreshed.And Then these posters were pasted all over the place"Then that should have worked!" said the friend."The hell it should have!? said the salesman. didn't realize that Arabs read from right to left"

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posted @ 5:21 PM, ,

Tax Treatment of Salary

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Case from mszuberi_associates:

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

Queries:

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.

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posted @ 11:04 AM, ,

Mark up Rate Subsidy for Spinning Sector

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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

To see the circular from SBP click here! To down load form click here!

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posted @ 3:51 PM, ,

Pakistan's Economic Review Jan-Jul FY-09

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Inflation Declining but Still High:

Money Market Review:

Trade Deficit crossed $10 Billion mark:

Future Outlook:

Ref: Treasury, National Bank of Pakistan

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posted @ 12:41 PM, ,

KUWAIT - Economic Overview

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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.

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posted @ 9:22 AM, ,

Export Finance Scheme

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

To see the SBP circular click here!

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posted @ 1:22 PM, ,

17th International Islamic Finance Forum

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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/

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posted @ 9:50 AM, ,

Interest Expense Vs Interest Income

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

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posted @ 4:44 PM, ,

Finance Jobs in FFC

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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

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posted @ 9:45 AM, ,

Economic and Business Updates - February 16 to 22, 2009

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

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posted @ 9:36 AM, ,

INTERNAL AUDITING SPECIALIST

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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:

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

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posted @ 9:49 AM, ,

Job in Engro

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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!

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posted @ 12:42 PM, ,

6th Schedule - Table of fees

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

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

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posted @ 1:44 PM, ,

Major Withholding Taxes Agents

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Prescribed Persons / Withholding Agent U/S Relevant Sections
  1. Collector of Customs U/S 148

  2. Authorized dealer in foreign exchange U/S 149, 154(1), 154(2)

  3. Registration Authorities (motor vehicles) U/S 231B

  4. Association of persons U/S 149, 152(1), 152(2), 156, 233

  5. Association of persons constituted by, or under, law U/S 149, 152(1), 152(2), 153(1), 153(3), 156, 233

  6. Banking Company U/S 149, 151(1)(a), 151(1)(b), 151(1)(d), 152(1), 152(2), 153(1), 153(3), 154(1), 154(2), 154(3), 155, 156, 231A, 233

  7. Body Corporate U/S 149, 151(1)(d), 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  8. Body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  9. CNG Stations (Gas consumption bill preparer) U/S 234A

  10. Company as defined under the Companies Ordinance, 1984 except a Small Company U/S 149, 151(1)(d), 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  11. Consortium U/S 149, 152(1), 152(2), 153(1), 153(3), 156

  12. Co-operative Society U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  13. Diplomatic Mission of a foreign state U/S 155

  14. Direct Exporter U/S 154(3B)

  15. Electricity Consumption Bill Preparing Authority U/S 235

  16. Export House registered under DTRE Rule, 2001 U/S 154(3B)

  17. Export Processing Zone Authority U/S 154(3A)

  18. Federal Government U/S 149, 151(1)(a), 151(1)(c), 152(1), 152(2), 153(1), 153(3), 155, 156, 233A

  19. Finance Society U/S 149, 151(1)(D), 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  20. Foreign association, whether incorporated or not, declared to be a company by the Federal Board of Revenue U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  21. Foreign consultant U/S 149, 152(1), 152(2), 153(1), 153(3), 156, 233

  22. Foreign contractor U/S 149, 152(1), 152(2), 153(1), 153(3), 156, 233

  23. Individual U/S 149, 152(1), 152(2), 153(1), 153(3), 156

  24. Local Authority U/S 149, 151(1)©, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  25. Manufacturer of motor cars U/S 231B

  26. Modaraba U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  27. Motor Vehicle Tax Collection Authority U/S 234

  28. Non-profit organizations U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  29. Persons selling petroleum products to petrol pump operators U/S 156A

  30. Company U/S 149, 152(1), 152(2), 155, 156, 233

  31. Trusts/Non-profit Sector U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  32. Telephone (bill preparer) & Cards (issuer & Seller) U/S 236

  33. Provincial Government U/S 149, 151(1)(c ), 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  34. Resident Company U/S 150

  35. Society established or constituted by or under any law for the time being in force U/S 149, 152(1), 152(2), 153(1), 153(3), 155, 156, 233

  36. Stock Exchange Registered in Pakistan U/S 233A

Ref: Income Tax Ordinance, 2001

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posted @ 4:41 PM, ,

Changes in Accounting Estimates

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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: 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:

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posted @ 5:01 PM, ,

Tax accounting: Cash vs. Accrual

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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.

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

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posted @ 12:18 PM, ,

Economic and Business Updates - February 09 to 15, 2009

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

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posted @ 12:08 PM, ,

Quit Smoking

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The government has increased federal excise duty (FED) rate on various brands of cigarettes from February 14, 2009.The FED would be;
Therefore, budies think before starting or increasing cigarettes consumption. It might be a valentine gift from governement of Pakistan to get rid of cigarettes. In short, quit smoking.

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posted @ 10:17 AM, ,

SECP - Relaxation in accounting treatment for equity securties

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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;

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posted @ 10:08 AM, ,

Witholding tax on freight charges

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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

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.

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posted @ 2:57 PM, ,

SBP amends banking prudential regulations

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

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posted @ 9:40 AM, ,

Crises and its causes

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Crises take different forms. They can be characterized by

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

Domestic causes include

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.

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posted @ 11:49 AM, ,

IRAN - Economic Overview

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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;

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posted @ 1:26 PM, ,

IFRS Diploma by ICAP

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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!

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posted @ 12:14 PM, ,

Economic and Business Updates - February 02 to 08, 2009

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

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posted @ 11:18 AM, ,

Gratuity Rules

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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

Gratuity amount = Last drawn gross salary x No. of years service

To see Standing order/rules of gratuity in detail please click here!

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posted @ 11:21 AM, ,

Government's action required by IMF

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

Fiscal consolidation during FY 09:

Borrowing from SBP:

Increase tax revenue:

Spending for social safety net:

Single treasury account:

Circular debt:

Electricity tariff adjustment:

Fuel price adjustment:

FY10 fiscal deficit:

Fiscal consolidation in medium term:

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

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posted @ 5:44 PM, ,

SBP's actions required by IMF

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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;

Changes in policy rate:

Operational independence of SBP:

Amendments in BCO:

Oil Support to market:

Liquidity management:

Auction calendar:

Advance import payments:

Plan for problem banks:

Ref: Monetary Policy Statement, January-March, 2009 (SBP)

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posted @ 5:16 PM, ,

Economic and Business Updates - January 26 to 01, 2009

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

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posted @ 11:27 AM, ,

Monetary Policy Statement - SBP

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

To view complete Monetary Policy please click here!

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posted @ 10:45 AM, ,


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