ACCOUNTING FOR MANAGERIAL DECISIONS MODULE V

CORPORATE REPORTING

BY SHRUTHI.S PREETI RANI NAYANA HEGDE CHEENU JAIN GADEN DICKYI IREEN.K

ACKNOWLEDGEMENT
We take this opportunity to express deep sense of gratitude to our Accounting for Managerial Decisions teacher for giving us an opportunity to work on this chapter, which also helped us in developing and exhibiting our presentational skills in the class. Lastly we thank our team members for their constant support and coordination without which this assignment would not possible.

CONCEPT OF CORPORATE REPORTING

In the companies there are definite provisions relating to the keeping of proper accounts, the preparation of financial statements and there reporting to the shareholders etc. Sections 210, 216 and 217 of the Companies Act, 1956 makes it compulsory for the Board of Directors to lay before the companys annual general meeting a copy of the profit and loss account and the balance sheet together with the directors and auditors reports. These documents are also known as Published Accounts because all companies print and published these annual reports. Corporate Reporting is another name given to these published accounts because they report to the public about the performance of the company.

OBJECTIVES OF CORPORATE REPORTING

The fundamental objective is to provide information which is useful for making economic decisions. OTHER OBJECTIVES OF CORPORATE REPORTING: Giving information about the performance of the company .

Giving information about the sources and applications of funds. Giving information about the products of the company Future prospects of the company Providing information about the commitments and liabilities for which no provisions has been made. Information about the employees whose emoluments are more than Rs. 200000

 Utilization of capacity and under utilization of capacity. Information about research and developments undertaken during the year. Capital projects undertaken by the company. Information about employee management relations during the year. Providing information about the role played by company in discharging its social responsibility.

Giving particulars of any material liability arising after the date of balance sheet but before the adoption of such accounts by directors.

USERS OF ACCOUNTING INFORMATION

EXTERNAL USERS:
1. Investors: To know the financial health, the investors need accounting information which will help them in evaluating the past performance and future prospects of the organization. Thus, investors for their investment decisions are dependent upon accounting information. 2. Creditors: To know the liquid position of the company the creditors need accounting information relating to current assets, quick assets and current liabilities which is available in the financial statements. 3. Government: Central and State government are interested in the accounting information because they want to know earnings and sales for a particular period for purposes of taxation. 4. Consumers: Consumers need accounting information for establishing goods accounting control so the cost of production may be reduced with the resultant reduction of the prices of goods they buy.

INTERNAL USERS 1. Owners: The owners need the accounting information to know the
profitability and the financial position of the concern in which they have invested their funds.

2. .Management: Accounting information is an aid to the management

because it helps a manager is appraising the performance of the subordinate. 3. Employees: Employees are interested in the financial position of the concern they serve particularly when payment of bonus depends upon the size of the profit earned.

TYPES OF REPORTS TYPES OF FINANCIAL REPORTS

1) DIRECTORS REPORT 2) AUDITORS REPORT

OTHER TYPES OF REPORTS

1) FORMAL AND INFORMAL REPORTS 2) ROUTINE AND SPECIAL REPORTS 3) SEGMENT REPORT 4) INTERIM REPORT 5) STATUTORY REPORT

DIRECTORS REPORT
MEANING
The Directors Report is a document produced by the board of directors under the requirements of UK common law, which details the state of the company and its compliance with a set of financial, accounting and corporate social Responsibility standards.

AUDITORS REPORT
MEANING
The auditor's report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an "Auditee"). The report is subsequently provided to a "user" (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit.

OTHER TYPES OF REPORTS

1) FORMAL REPORT: formal reports, will be a report that is exchanged or submitted to higher management or outside the company. Formal reports can be cumbersome and time consuming. They are usually longer than informal reports.

INFORMAL REPORT: Informal reports are usually exchanged among a department's members. Informal reports usually arise based on the needs of the members of the organization or group.

2) ROUTINE REPORT: These reports are required to be prepared and submitted periodically on matters required by the organization so as to help the management of the organization to take decisions in the matters relating to day to day affairs. The main objectives of routine reports are to let the management know as to what is happening in the organization, what is its progress where the deviation is, what measures have been taken in solving the problems and what to do so that the organization may run smoothly and efficiently. Routine reports are generally brief. They only give the facts. No comments or explanations are usually offered in such reports. Generally forms are prescribed for preparation and submission of such reports.

SPECIAL REPORTS: Such a type of report is specially required to be prepared and submitted on matters of special nature. Due to an accident a death of the foreman has occurred in a factory. The factory manager may ask for a detail report from the head foreman. Such a report is classified as special reports. These reports contain not only facts and details but they may contain suggestion, comments and explanations as well.

3) SEGMENT REPORT: In this financial information is reported according to different segments of an enterprise. Various segments of an enterprise may be according to different types of products and services produced by the enterprise or various segments may be according to the different geographical areas in which the enterprise operates. It helps the users of financial statements in: a. Better understanding the performance of the enterprise; b. Better assessing the risks and returns of the enterprise; and c. Making more informed judgments about the enterprise as a whole.

4)INTERIM FINANCIAL REPORT: It is a financial report containing either a complete set of financial statements or a set of condensed

financial statements for an interim period which will be less than a full financial year. This report should include the following components:

a. Condensed balance sheet b. Condensed statement of profit or loss c. Condensed cash flow statement and d. Selected explanatory notes.

5)STATUTORY REPORT: It is a report which is sent along with notice of meeting .It contains information regarding the registration of the company; assets and properties acquired or to be acquired; allotment of shares for cash and otherwise, receipts & payments of cash; preliminary expenses, underwriting commission, details of contracts submitted for approval, etc.

QUALITIES OF GOOD FINANCIAL REPORT

A financial report is a formal record of the financial activities of business, person or other entity for fair financial reporting and allowing those reading the report to have good sense of organization. 1. 2. 3. 4. 5. 6. 7. 8. Understandability Predictive Value Feedback Value Relevance Timeliness Reliability Verifiability Neutrality

9. Representational faithfulness 10. Comparability 11. Consistency 12. Materiality 13. Conservatism 14. Full disclosure 15. Fairness

Report of Board of Directors

Directors report is an important constituent of corporate reports. It provides information relating to past performance and future prospects of the company.

Section 217 of Companys Act requires the Boards report to provide information relating to:
a) State of companys affairs b) Amount proposed to be carried to any reserve c) Amount recommended to be paid as any dividends d) The material changes and commitments, if any affecting the financial position of the company which have occurred between the end of financial year to which balance sheet relates the date of report e) Conservation of energy, technology absorption, foreign exchange earnings and outgoing in such manner they may be prescribed Board report should provide material important for appreciation of State of Companys Affairs and will not be harmful to business about the changes occurs during the financial year

a) In the nature of companys business b) In the nature of business carried on by its subsidiaries c) Generally in the class of business by which company has an interest

Board report, Inter-alia should include directors Responsibility Statement indicating therein:
a) Applicable Accounting Standards have been followed along with proper explanation to any material departure. b) Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent. c) Directors have ensured maintenance of adequate accounting records in accordance with the provisions of Companys Act. d) Directors had prepared the annual account on a going concern basis.

Audit Reports of Companies

a) The auditor expresses an opinion on the accounts examined by him, and on every balance sheet and profit and loss account. b)The auditors report covers all document annexed to the balance sheet but excludes from its purview documents which are attached to the balance sheet. c) Section 227 of Companies Act prescribes the matters on which a company auditor has to report.

The Statements of Facts to be included in the Auditors Report

a) Whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purposes of his audit. b) Whether report on account of any branch audited under Section 228 has been forwarded to him. c) Whether companys balance sheet and profit and loss account dealt With by the report are in agreement with the books of account nad returns.

Opinion of Auditor on the following matters:

a) Whether proper books of account as required by law have been kept by the company. b) Whether the accounts give the information required by the act in the manner so required. c) Whether the accounts give the true and fair view in the case of the balance sheet of the state of companys affairs.

Social Accounting
Social Accounting Meaning: Social accounting is identification, measurement, recording and reporting of corporate activities which may permit informed decision-making with respect to social activities of the firm having direct or indirect effect on the very fabric of the society at large, while social audit would mean enquiry into the corporate social accounting records by an outside agency that can opine with a view to attestation and authentication of such records and reports.

Social Responsibilities of Business:

It may be made clear that discharge of social responsibilities by a business unit is not something opposed to earning of profits. As a matter of fact, unless a business unit makes sufficient profits, it will not be in a position to discharge social responsibilities. A business unit that is incurring losses or making a small amount of profit will always be tempted to adopt the short cut to profile and may thus injure the society in many ways like paying lower wages and getting more work from workers, evasion of taxes, increasing price of product etc. A little introspection on the part of the business community will reveal that earning of profit is desirable for the survival and strength of the business but it cannot be the sole objective of business. With this general observation keeping in mind, we can describe briefly the social responsibilities of business as follows: 1. Resources: it is the responsibility to use the various resources (i.e., material, labour, capital, machines and management) employed by it in the best possible way and avoids wastage. Wastage is ant-social in a developing country like India where there is an actual shortage of resources. Production can be increased by the use of increased input

2.

3.

4.

5.

resources and also by increasing productivity (i.e., best possible use of resources). Customers: business has a very positive responsibility towards its customers. Then main purpose of a business is to create demand. In the long run, the objective of earning profit is defeated if business fail to provide the goods and services that the customer need at a price which they afford. It is the social responsibility of the business to provide quality goods at reasonable prices. There should no fleecing of customers by the business community. Employees: owner and management of a business unit should not treat employees as a commodity which can by hired and fired at their will. Employees are not to be treated as a cog in the machine, but they are to be treated as human beings who have economic, psychological and social needs. Efforts should be made to find out ways and means to provide off the job, around the job and on the job satisfaction to the employees. Government: Indian government has set the objective of establishing a socialist pattern of society. The business community can play an effective role in this regard by following the policies and declared objectives of the government. Businessmen can also help the government by paying taxes honestly. Society: the business community is to help the government in solving social problems associated with industrial development. The most important problem associated with industrial growth is environmental pollution. Industry causes various types of pollution-of the air, the water, the landscape and increased urbanization with consequences of slums, filth and congestion. Governments all over the world are worried and are taking steps to control pollution to acceptable limits. Government alone cannot solve this problem of a gigantic magnitude but the business community has to render every possible help to the government to contain pollution to reasonable level. Pollution control is just one example of

solving the problems of the society. Besides this, there are many other social problems like problem associated with increased urbanization, unequal distribution of economic resources, unemployment etc. the business community can help the society by constructing temples, schools, colleges, hospitals and adopting villages for spreading health, knowledge and removing illiteracy.

Approaches to Social Accounting

1. The inventory approach, whereby companys social objectives are prepared. 2. Cost or outlay approach, whereby the expenditure on each activity is disclosed. 3. The programme management approach, whereby in addition to the above disclosures a statement is recorded; and 4. The benefit cost approach, whereby the real worth i.e., the benefit of the expenditure is indicated.

Measurement of Social Cost Benefit

1. Capital output ratio: this ratio gives of the expected output in relation to the capital invested in the project. This method of measurement is important in case of developing counties where there is shortage of capital resources. As per this method, a project giving a higher output per unit of capital employed is to be given preference over a project giving a lower ratio of output to capital. 2. Value added method: this method is better than capital output ratio method because it takes into consideration the net contribution made by the business to the nations economy. According to this method, a project having higher value added is preferred over a project having lower value added.

3. Employment potential: this criterion of measurement of social cost benefit is important in a country like India which has acute problem of unemployment. Society stands benefited when the project provides more employed opportunities to its members. A project is having a higher employment potential is to be preferred over a project having lower employment potential. 4. Saving in foreign exchange: this is an important social criterion for accepting or rejecting a project. According to this criterion, a project having potentiality in term of foreign benefits will get priority over a project having foreign exchange benefits. 5. Social cost benefit ratio: according to this method, a project having a

Dr.

Cr.

lower cost benefit ratio is preferred over a project having a higher cost benefit ratio. In other words, the lower the social costs, the better it is. Social benefits for calculating this ratio include all economic and noneconomic benefits which the society is likely to receive on account of the project. Similarly, social costs include all costs which the society is likely to pay in monetary and non-monetary terms for the project. Social cost benefit approach may be presented in the form of accounts as shown below: Employees Account

1. 2. 3.

4. 5.

1. Shortfall of actual wages below the 1. Excess of wages above the living living wages wages. 2. Strains and stresses because of poor Cr. 2. Wages paid back in form of direct Dr. working conditions. and indirect taxes. 3. Strains and stresses because of 3. Development of human resources Balance (Dr.) from the employees A/c. 1. Balance (Cr.) from the Employees A/c. injustice to workers. by acquiring skills. Pollution of air, water or landscape in excess 2. Net value added as a result of production 4. permissible Balance(Cr.) to the societys A/c. Job of satisfaction and happiness at of limits. in 4. excess remuneration of people working Consequences of slums, filth, and in work. the concern. Social benefit due to the change in congestion because of too much 3. 5. Development of new useful products. urbanization. 4. the Development new force entrepreneurial attitude of of labour because Harm caused by harmful products. ability. of economic development. Service provided by the society free of cost 5. 6. Environment improvements. Balance (Dr.) to the Societys A/c.

such as education etc. 6. Subsidy provided by the society represented by the excess of cost over prices charged for infra-structural facilities like roads, railways etc. 7. Balance (i.e., contribution to the society).

6. Excess of rates over the cost of social service taken. 7. Expenditure on community development. 8. Social benefits of increased employment opportunities as a result of economic development. 9. Balance (i.e., contribution of the society to the business).

Societys accounts

Social Accounts
Social Income Statement
(rupee in lakhs) 1. SOCIAL BENEFITS AND COST TO STAFF Current year (rupee in lakhs) Previous year

A. Social benefits to staff: 1. Medical and hospital facilities 2. Education facilities 3. Canteen facilities 4. recreation, entertainment and cultural activities 5. Housing and township facilities 6. Water supply, concessional electricity and transportation 7. Training and career development 8. Provident fund, gratuity, bonus, insurance benefits 9. Holiday, leave encashment and leave- travel benefits 10. Other benefits Total Benefits to Staff B. Social Costs to Staff: 1. Lay off and inventory termination 2. Extra hours put in by officers voluntarily Total Social Income to Staff-1(A-B)

2. Social benefits and cost to community

C y

A. Social benefits to community: 1. local tax paid to Pancahyat /Municipality 2. Environment improvements 3. Generation of job potential 4. Generation of business Total Social Benefits to Community B. Social cost to community: Increase in cost of living in the vicinity on account of the cement plants or a thermal power station. Net Social Income to Community II (A-B)

3. Social Cost and Benefits and Costs to General Public:

A. Social Benefits to General Public: 1. Taxes, duties, etc. paid to the State Governments. 2. Taxes, duties, etc. paid to the Central Government. Total benefits to General Public B. Social Costs to General Public: 1. States services consumed- Electricity service 2. Central service consumed- telephone , telegrams, postal services and banking. Total social cost to general public Net Social Benefits to General Public- III(A-B)
NET SOCIAL INCOME TO STAFF, COMMUNITY AND GENERAL PUBLIC (I+II+III)

HUMAN RESOURCE ACCOUNTING

MEANING Human resource accounting means accounting for people as the organizational resource. It is the measurement of cost and value of people to organization. It includes measuring cost incurred for recruit, selection, hiring, and training and develops employees and judge their economic value to the organization. Human resource accountings the process of identifying and measuring data about human resources and communicating this information to to interested parties. NEED FOR HRA It is known fact that success of an organization depends on quality and character of the people working in it. Employees are the greatest assets of an organization and the success or failure of depends on the skill and the performance of employees. Human resource is a very valuable asset without which an organization cannot progress in any direction.

REASONS FOR HUMAN RESOURCE ACCOUNTING INTERNAL REASONS 1. To improve human resource management 2. To focus on employees as assets 3. To retain qualified work force.

EXTERNAL REASONS 1. To overcome the difficulties in providing sufficient information to investors in traditional balance sheet. 2. To profile the enterprise and to improve its image. 3. To attract future employees.

Objectives of human resource accounting

1. To furnish cost value information for making management decisions about acquiring, allocating, developing and maintaining human resource in order to attain cost effective organisation objectives. 2. To allow management personnel to monitor effectively the use of human resources 3. To provide a determination of assets control. i.e. whether human assets are conserved , depleted or appreciated. 4. To aid in the development of management principles by classifying the financial consequences of 5. To recognize the nature of all resources used or cultivated by a firm and improvement of the management of human resources so that the quality and quantity of goods and services are increased. 6. To facilitate the effective and efficient management of human resources. 7. To evaluate the return on investment in human resources.

THE IMPORTANT APPROACHES FOR HUMAN RESOURCE VALUATION

1. HISTORICAL COST APPROACH This approach was first developed by William C Pyle and R.GBary Corporation. In this approach actual cost incurred on recruiting , hiring . training and developing the human resources of organisations are capitalised and amortised over the expected usesful life of the human resorces. Thus a proper recording of expenditure made on the hiring selecting and training and developing employees is maintained and proportion of it is written off to the income of the next few years during which human resources will provide service. If the human resources are liquidated prematurely , the whole of the amount not written off is charged to the income of the year in which such liquidation takes place.

2. REPLACEMENT COST APPROACH This approach first suggested by rensis Likert, was developed by Eric G. Flamhoz on the basis of concept of replacement cost. Human resources of organisation are to be valued on the assumption that new similar organisation has to be created from scratch and what would be the cost to the firm of the existing resources are required to be replaced with other person of equivalent talent and experience. It takes into consideration all the cost involved in recruiting ,hiring ,training and developing the replace to the present level of proficiency and familiarity with the organisation.

3. OPPORTUNITY COST This method was first advocated by Hc Kiman and Jones for a company with several divisional heads bidding for the service of various people they need among themselves and then include the bid price in the investment cost. Opportunity cost is the value of an assets when there is an alternative use of it .There is no opportunity cost for those employees that are not scare and those at the top will not be available for auction. As such only scare people should comprise the value of human resorces.

4. STANDARD COST APPROACH This approach envisages establishment of a standard cost per grade of employees updated every year. Replacement costs can be used to develop standard costs of recruitment , training and developing individuals. Such standard can be used to compare results with those planned. Variances produced should be analyes and would form a useful basis for control. But under this approach determination of the standard cost for each grade of employee is a ticklish process. 5. PRESENT VALUE APPROCH Under this approach the value of human resources of an organisation is determined according to their present value to the organisation. a number of models have been developed to determine the present value. They are
a. b. c. d. e. f. Present value of future earning model. Reward valuation method Net benefit model Certainty equivalent net benefit model Aggregate payment approach Total cost concept.

RECENT TRENDS IN CORPORATE ACCOUNTING

Accounting is the language employed for communicating financial information of a concern to various parties who are interested in such information. Communication of financial information and other information by published accounts serves its purpose only if it satisfies the needs of persons well-versed in accounting language on the one hand and laymen not familiar with accounting techniques on the other. According to Dr.S.B.Chowdhary. Every effort was made under the companies Act, 1956 to give the shareholder as much information as is possible. This has burdened the balance sheet with a mass of detailed information, which needs an expert eye to understand it Again to quote F.S. Bray and H.B. Sheasby, The technique of accounting draftsmanship is developing fast and still has a long way to go in keeping with the developing critical facility of interpretation. What the future has in store we can but dimly discern: there may be progress in graphic and diagrammatic forms and we may see the issue of periodical statements at regular and frequent intervals to supplement the customary annual accounts, but however this may be, it is becoming intervals to supplement the customary annual accounts, but however accounts that they shall at least make plain the facts of business enterprise Keeping in view the complicacies of statutory forms as prescribed in the Companies Act, now-a-days it is a common practice to add to the profit and loss account and the balance sheet drawn in statutory forms, some voluntary supplementary information in a simple manner as would be easily understood by a layman. This voluntary information may include the following:

(a) Summarized Profit and Loss Account and Balance sheet Now-a-days companies are discarding the preparation of traditional two sided balance sheet and profit and loss account and are following columnar forms of balance sheet and profit and loss account which are a simple way of presentation of information. The columnar or vertical form of presentation of final accounts conveys more meaning to the layman because it speaks out the correlation of every item with the other items. (b) Highlights Highlights are usually shown at the beginning of the annual report so that the reader may come across the important facts of the company immediately as he opens the report. Highlights are also put under other headings like facts at a glance, facts in a nutshell or year at a glance. Highlights are given so that the reader may know the working of the company at a glance without loss of time. Highlights usually cover information about sales, production, profit before and after tax, shareholders equity and important landmarks of the year. (c)Cash flow statement An enterprise should disclose together with a commentary by the management, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it. Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. This statement deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a cash flow statement which classifies cash flows during the period from operating, investing and financing activities.

(d)Funds flow statement The funds flow statement is becoming popular day by day because it explains why in spite of huge profits earned by the company, it is facing difficulty in making the payment to creditors in time. It is a financial operational statement which reveals the methods by which the business has been financed and how it has used its funds between the opening and closing balance sheet dates. This statement is known by various titles, such as Statement of sources and Applications of Funds, Statement of changes in Working Capital and Statement of Sources Provided and Applied. (e)Provision of Important Ratios Ratio is one figure expressed in terms of another, it is an expression of relationship between one figure and the other figure which are mutually interdependent. Absolute figures are valuable but they standing alone convey no meaning unless compared with one another. Accounting ratios show the inter-relationship which exists among various accounting data some of important ratios are Current Ratio, Liquid Ratio, Percentage of Current Assets to Total Assets. (f)Disclosure of Accounting Policies Now-a-days progressive companies also disclose accounting policies in their published accounts on the basis of which they have prepared their financial statements. This is done with a view to giving better understanding of the financial statements to the public. As per Accounting Standard 1on Disclosure of Accounting Policies, Companies are required to make a disclosure of accounting policies they have followed in the preparation of financial statements. (g)Use of Charts, Graphs and Diagrams Now-a-days, many companies include charts, graphs and diagrams in their published accounts. It is known as graphic method of presentation of

information. It is an important method of presenting information because it attracts the eye of the recipient more quickly and forcibly. They are the most effective media for disclosing trends and making comparisons over fairly long periods within a short space. This method of presenting information can effectively depict production costs, fluctuation in output and sales etc. (h)Use of Schedules Now-a-days efforts are made to make the balance sheet and profit and loss account as compact as possible. For this purpose, separate schedules for different heads are prepared and details regarding those heads as prescribed in the Companies Act are given in these schedules. This is done to make the balance sheet and profit and loss account manageable within limited space. If all details as prescribed in the Companies Act are given in the balance sheet and profit and loss account, their size will be large and it will be very difficult to make out the meaning to make the balance sheet and profit and loss account simple and readable, increasing use of schedules for different heads is being made by many companies now-a-days. (i)Impact of Price-level Changes Price does not remain constant; they go on changing every day. Financial statements or reports based on historical costs fail to reflect the effect of price-level changes on the financial position and profitability of the company. Keeping this in view, accounting for price-level changes has been engaging the attention of the accounting authorities of almost all the countries in the world in the recent past and many companies have started showing the effect of price-level-changes on the financial statements in a supplementary statement in addition to the conventional statements which are prepared under the historical accounting system.

(1) (2)

(j)Rounding off of figures The Sachar Committee has recommended that companies should be given the option to round off the figures in the balance sheet to the nearest thousand or hundred or ten rupees. The committee is of the view that such a step will facilitate the publications of accounts in an intelligible form. This recommendation of the Committee has been accepted by the Government and Companies are increasingly making use of rounding off of figures. (k)Disclosure of Post statement Events It is possible that many events might have occurred after the closing date of the accounting year for which financial statements are to be prepared affecting the interpretations of these statements and the resulting decisions based on the information contained in such statements. To the extent such events become known before the annual report is printed, the objective of corporate reporting requires that information relating to these events should be given in the annual report so that users of the annual report may not be misguided. (l)Segmental Reporting Recent trend is to make available to the users of financial statements segmental information based on geographical and business segments for assessing the prospects and risks of a diversified enterprise. The Institute of Chartered Accountants of India has issued Accounting Standard 17 Segment Reporting which is effective and mandatory in respect of accounting periods commencing on or after 1-4-2001. This standard is applicable to: Enterprises whose equity or debt securities are listed on a recognized stock exchange in India. All other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds rupees fifty cores.

(m) Social Accounting The main emphasis for evaluation of a business unit was on commercial aspects that is profitability; the social aspect has so far been ignored. Business today cannot strictly adhere to only one objective of maximizing profit. No doubt earning profit is necessary for the survival and growth of business. Business units now-a-days function under a particular political, economic and social environment. Many rules, regulations and laws relating to social responsibilities of the business have been framed by the Government and as a result people have become conscious of their rights and cannot tolerate the socially irresponsible behavior of business units. (n) Human Resource Accounting It is a known fact that success of an organization depends on the quality, caliber and character of the people working in it. Employees are, thus the greatest asset of an organization and the success or failure depends on the skill and the performance of the employees. Thus, human resources is a very valuable asset without which an organization cannot progress in all directions. In a business enterprise, a well organized and loyal work force may be much more asset than a stock of merchandise. The efforts are made in valuing employees as an asset and report this fact to their shareholders in their annual statements or report it as a supplementary information are one of the recent trends. (o) Corporate Governance Report it is a system by which companies are directed and controlled. Everyone who is part of the system is contributing to corporate governance. The imperatives of corporate governance flow from the concept of accountability for the safety and performance of assets and resources entrusted. In small business, employees performing tasks will be accountable for their actions to the proprietors or partners.

Accountability in such cases is easily managed as the lines of communication are short and straight forward. Who exercises power on behalf of whom, and how the exercise of power is controlled. Annual reports should contain a separate Section of Corporate Governance with a detailed compliance report thereon.