ICSI Vision 2022-my views

The usual practice of newly elected heads of professional bodies(ICAI, ICSI, ICWAI) is to host conventions in their home cities, go globe trotting, and try to leave their imprint on the institute in the short 1 yr tenure. However, the dynamic ICSI President Dr Shyam Lal Agarwal is an exception. He has updated the Vision 2020 document to Vision 2022. Here are my views on the salient points(do read it here https://www.icsi.edu/webmodules/Vision_New_ICSI_2022.pdf

Overall a motivational read.

The Good

• Disruption Realization: Art of reading, interpreting and understanding the law is more important than studying a large number of laws;..It is expected that the routine and procedural matters will be automated with the support of technology. Therefore, focus should be on value- added areas, like advisory, advocacy and strategic management. 
• Asset Light: More and more emphasis should be given to create IT and digital infrastructure instead of physical infrastructure;
• Governance starts with Self: Performance evaluation of the Council and its Committees, President, Vice-President, Council Members and Secretary may be introduced;
• Speakers for national convention:Speakers should be invited keeping in view their expertise and exposure to the subject(and not on their PR value :D)
• Research Repository: Maintaining a data base of various research papers carried out including published and unpublished papers, project reports submitted by members and students during the course of their training. Secrecy of info would be a challenge but manageable via black out of information
• Specially designed Refresher Courses may be organized for members to be undertaken every five years for updating their knowledge and skills.

Business as Usual/Expected

• India focus: Research on origin of Corporate Governance from Indian ethos should be carried out, documented and given wide publicity
• SMAC:There should be a standard format for obtaining feedback on every professional development programme. The possibility of obtaining instant feedback through Mobile App may be explored;
• SME: The members should be encouraged to seek employment / practice opportunities in the SMEs and small cities also

The Bad

• undertaking sponsored research: How does this ensure autonomy? 
• The concept of ‘Senior Company Secretary’ may be introduced, on the lines of ‘Senior Advocate’ in the legal profession, to provide distinct status and recognition to the experienced members. The Senior Advocate concept is not a desirable one for clients and is an indirect advertisement. Is this really necessary for a self regulatory body?

Interesting stock market tactics used by companies

The stock markets are a place where Caveat Emptor(Buyer Beware) applies to its fullest. If you come across any of the below tactics, do 

1. Issue QIP/Decisions just before a major negative event
1. Money Matters-QIP at peak price just before MD was arrested
2. Yes Bank-Issue QIP in Q4'17 before disclosing potential provisioning lapse
3. Axis Bank-MD/CEO reappointment and performance bonus, just before NPA issues
2. Declare results at a very early date after quarterly closing, to attract attention
1. Sanwariya Consumer-Declared Jul17-Sep17 results on Oct 3rd, 2017(Remember Oct 1/2 were holidays) albeit unaudited
2. Kitex-Releasing its audited results for Apr15-Mar16 on Apr 4, 2016!! Surpassed even Infosys. For FY167 however, they released with a month's lag
3. Delay results/ declare results quite late with some bad news/Extend Reporting year
1. Axis Bank-When it declared results for Q2'18 showing NPA slippage
2. Shree Renuka Sugars-Extended financial year to 15months without a clear rationale
3. Commission research report and upload on website
1. CRISIL research(most companies) albeit neutral
4. AGMs
1.  at remote locations to minimize attendance-Inox Wind?
2.  at quarter end/latest possible dates to minimize attendance-Many Cos
5. Glossy annual reports
1.  by firms like TRISYS to simplify business. metrics
2. Focus on extraneous stuff-Temptation Food seductive photos of women.
6. Suddenly start holding conferences presentations, analyst calls etc, but stop it when bad times happen. For example
1. Sanwariya Consumer sudden spurt of presentations, reports
2. Educomp ceasing to update its website after bankruptcy
7. Announce plans with limited execution 
1. DCB Bank retail expansion-subsequently rolled back due to resistance and ESOPs repriced to adjust for this benefits
2. Crompton Greaves-Plans to turnaround/hiveoff units but not done

Coattails customer-examples of listed companies with dependence on one customer

Customer concentration is good and bad. Good because it indicates there are some loyal users of your product, bad because they have pricing power. Some examples below:

1. Nile Limited (manufacturer of lead acid batteries) supplies 80% of its output to Amara Raja(another unrelated listed player). This exposes it to risks of revenue loss
2. Vakrangee (a last mile B2C/B2G/G2B kiosk) has run up due to its tieup with the global 800 pound ecommerce gorilla Amazon, where the tieup allows Amazon orders to be placed via(and delivered to) the Vakaranjee Kendra. Not yet key person risk, but still significant. 
3. Future Consumer products(FMCG asset light play of Kishore Biyani) gets ~70% of its revenues via the Future Retail and other related(not owned by it but by promoters) entities. This makes it akin to contract manufacturer
4. Solar Explosives gets ~30% of its revenues from Coal India. Of course, to put this in perspective, 90% of the explosives use in India is industrial, and coal mining is a great chank. So this is understandable. 
5. Manpasand Beverages(listed beverages player) gets 25% of its revenue from Indian Railways via the mango/apple flavour drinks sold on the trains/railway stations
6. This list excludes franchises/exclusive players which have different risks such as 
1. Page India(For Jockey)
2. Jubilant Foods(for Dominas)
3. Westlife(for McD)
4. Varun Beverages(for Pepsi)

In all these companies, there is always a disruption risk apparent and/or risk of dispute etc. Hence, one should take care while seeing the financials-whether this is a contract manufacturer or branded player in reality-one indicator is margin volatility etc. Also, IND-AS has some guidance on take or pay contracts, so thats useful too

Why should you go for a tax opinion/ruling?

Recently, I have had the experience of reviewing direct/indirect tax rulings for my employer. While the process is useful, I was left wondering that with so many caveats/disclaimers, why should we go to the whole pain of getting one? After all, for other subjects such as valuation, accounting etc, opinions are rarely sought. Why make an exception for tax and law? After some search, I found out the following reasons. The primary reason in the Indian context is statutory reasons(financial statement or tax penalty protection).

1. Comfort opinion/Vet the transaction: Provides the taxpayer with comfort that a transaction the taxpayer is considering entering into will have the expected tax consequences. This involves steps like making sure all issues are properly thought out and documented, confronting any shortcuts or sloppy thinking, and due diligence via fact collection. From an internal standpoint, it is also useful as to assure proper implementation and continued compliance, and memorializes analysis for future reference
2. Contractual condition opinion:  Other parties seek assurance/closing condition as receipt of the opinion that the transaction will have the tax consequences specified in the contract.
3. Disclosure opinion: This opinion gives comfort regarding a person’s duty to disclose.
4. Penalty protection opinion: This opinion is intended to permit clients to rely on to avoid possible civil penalties.Can deter IRS  from challenging or asserting penalties.
5. Financial Statement Recognition: This opinion provides advice regarding the tax treatment of items for purposes of financial statements.  The “more likely than not” standard is required in order to recognize, for financial statement purposes, a tax benefit with respect to which there is some legal or factual uncertainty. This would be acceptable to the financial statement auditor. 
6. Reporting opinion:  This opinion provides advice regarding the proper tax reporting of a completed transaction.

References
https://www.americanbar.org/content/dam/aba/publishing/aba_tax_times/16feb/att-16feb-15ptc-d1p5-tax-opinions-3-0-ethical-considerations.authcheckdam.pdf

https://taxassociate.wordpress.com/2014/06/12/tax-opinion-practice/