Cloud in Spectrum

It is quite some time now since the first biggest so called “Scam” of the ruling UPA government was brought to light by the Comptroller and Auditor General (C&AG) of India. The estimate of loss to the Government ranged from Rs 4,000 crores to Rs 2,00,000 crores as read in the most reputed newspapers and as broadcasted by the high TRP news channels. Isn’t it strange to unearth such a huge discrepancy after so many years of spectrum allocation. Anyways, I assume that our learned professionals must have thought many times before declaring a war against the Common man’s interest of this Country. Yes, this is a war where on one side, there are Political Parties and on the other hand, the vast populace of this Country, which is seen to be a cash cow.

Everyone seems to forget one fact that Spectrum is a national resource, the so called scam of allocation that originated 5 years back in 2007 when the growth story of India had begun during 2005-06. If there was a real loss to the government, then how can government achieve such excellent growth rates after being fooled in waves distribution from 2005 till 2010. It is just a Mark to Market calculation in excel file. The actual loss if any should be worked out based on unjust enrichment to the parties.  

Another thing which is important is that the final losers with the revised policy allocation is no one but we the people. If the Government is successful in getting high fees for the airwaves from the Corporates, the same will be passed on to us as we are the final consumers.

I somehow fail to understand the Policy of the Government with respect to allocation of natural resources when the end consumption in the value chain is within India. For instance, Spectrum is utilized by Indian Consumers and hence the cost of procurement of such Spectrum by Corporate is thus a pass through to our pockets.

Why not we follow a Public Private Partnership (PPP) model wherein the Spectrum is given at a low price and as part of the contract, the tariff are also fixed by the Government so that the Corporate does not benefit or take any arbitrage opportunity.

Other perspective is that when we have the benefit of hindsight, we can find faults in all the past deeds. But the positive outcomes of thise deeds are unseen, such as the “One Rupee” per minute revolution in the Telecommunication of India, which was the then cheapest rate of calling in the world and still continues to be.

If the Government continues with its selfish and anti common man policies, I am sure that we the same people will be paying the highest tariff for telecommunication in the world in future..          

Revised Schedule VI

Principles:

1.       Revised Schedule VI is applicable from financial year commencing on or after 1st April 2011. Comparative amounts to be given for 2010-11 except for the first financial statements.

2.       Circular issued by the MCA clarifies that financial statements for purpose of IPO/FPO during the financial year 2011-12 maybe in the format of the pre revised schedule VI. However, for period beyond 31st March 2012, new format is applicable.

3.       The requirements of the Act and AS will prevail over Schedule VI. Terms to be interpreted as per applicable Accounting Standards e.g. Cash and Cash equivalents disclosure.

4.       Changes in numeric presentation rule - If turnover is less than Rs 100 crores then rounding off can be done to the nearest hundreds, thousands, lakhs or millions, or decimals thereof and if turnover is Rs 100 crores or more then rounding off can be done to the nearest, lakhs, millions or crores, or decimals thereof.

5.       Format of Cash Flow statement has not been prescribed. Only vertical format has been prescribed.

6.       Income statement classification continues to be based on nature of expenses as was there in old schedule VI. Under IFRS, the classification is mostly based on functions.

7.        The current / non-current classification in Balance sheet is broadly in line with that of IAS 1.

Classifications:

1.       Convertible Bonds / Liabilities continue to be classified as Borrowings unless Company follows Ind AS for accounting such compound instruments which splits the instrument as Debt and Equity.

2.       Trade Receivables: Outstanding period means a period exceeding six months from the “due date” in revised Schedule VI as against “bill date” as part of Old Schedule VI

3.       Deferred Tax liabilities/asset will always be classified as Non-current.

4.       Capital Advances is no longer part of CWIP, instead it will now form part of Long Term Loans and Advances i.e. Non Current.

5.       Retirement Benefits will have to be classified as current as well as non-current, unlike IFRS where it is always Non-current.

Regarding funded post-employment benefit obligations, amount due for payment to the fund within twelve months created for this purpose is treated as “current” liability. Regarding the unfunded postemployment benefit obligations, a company will have settlement obligation at the Balance Sheet date or within twelve months for employees such as those who have already resigned or are expected to resign (the Actuary factors this information for actuarial valuation) or are due for retirement within the next twelve months from the Balance Sheet date. Thus, the amount of obligation attributable to these employees is a “current” liability. The remaining amount attributable to other employees, who are likely to continue in the services for the next twelve months, is classified as “non-current” liability. The actuaries should be requested to provide the amount of current & non-current liability for unfunded post-employment benefit obligation based on the definition of Current and Non-Current Assets and Liabilities in the Revised Schedule VI.

6.       Acceptances will be part of Trade payables and to be classified as current / Non-current based on its maturities.

7.       Debit balance in Profit & loss account to be shown as part of Reserves and Surplus, even if the resultant figure of the entire schedule is in negative.

8.       Fixed deposits having original maturity of less than three months are cash equivalents and more than 3 months but less than 12 months are classified as other current assets.

9.       Share application money pending allotment is shown separately between Shareholders funds and Non Current Liabilities, thus treating it as Quasi Equity. Under IFRS it is either part of Equity or Liability.
10. Covenant breach does not necessarily call for current classification of long term borrowings.