11-04-2007, 02:55 AM
Dear Ahmed and Shoaib,
Prototype should be analysed in view of the criterion given in paragraph 57 in its sub-paras (a) to (f) as it is an internally generated/created design. PAC's book cannot be considered the bible for this purpose. However, there could be materially different professional views on the subject matter.
As far as Income Tax Ordinance, 2001 is concerned, it was promulgated when no development / improvement work was done on Companies ordinance and its schedules, as it was baiscally promulgated in 2001 although implemented in 2003. The companies amendment ordinance 2002 was issued during the month of October 2002 which was promulgated after the Income tax ordinance 2001 and was also a confused development on so many areas which were gradually amended and corrected afterwards. And this process is still going on.
There had been a very critical debate on the applicability of section 234 of the companies ordinace and its severe conflict with fifth scedule to the companies ordinance (before its current revisions). This prompted ICAP and SECP to take a corrective action which has resulted in current revision of fifth schedule and development of accounting standard on medium and small size entities.
As a matter of fact, professional opinion has since been evolved to amend and resemble the disclosures, methodologies and presentation with IFRSs. So manys started doing it well before the current change in fifth schdule and development of local standards.
The accounting and financial reporting standard for MSEs can be analysed to conclude that almost all the IFRSs have been used as a guideline to reach the conclusions and infact is only a Précis writing effort.
It is also our habit not to amend various laws to bring similarity and agreement among them. This cud be seen in so many cases. Thats why section 25 of ITO 2001 has not so far been amended even the revision of fifth schedule in August 2007.
In my view fifth schedule was basically purposed only for specifying disclosure requirements while for recognition and measurement we were always dependent upon Legal Generally Accepted Accounting Principles (Legal GAAP). And in Pakistan Legal GAAP (approved set of accounting standards) was only the IFRSs and other guidances as per CO84. After the amendment in CO 84 in 2002, in my view, it was quite sensible to follow as a general guideline what was being followed by listed companies for recognition and measurement purposes. Since the recognition and measurement as per legal GAAP was not allowing to defer the costs and expenditures, therefore, what was stipulated in disclosures list provided by the then Fifth schedule was almost redundant and irrelevant. This has been proved by the subsequent events.
Therefore, in my view, even in 2006 accounts, it is not sensible to follow the previous fifth schedule as it will lead to a change in accounting policy in the year 2007 and again the balance of any such outstanding deferal will have to be written off.
Further to above, as per standard for MSEs, an entity must observe the date of approval and authorization for issue of financial statements. Any thing or event before the date of authorization (normally Board meeting) of accounts is not considered as non adjusting event. The effective date of standard and revised schedule is not given in the notification which means that these are applicable from the date of issuance that almost falls in August 2007.
If the authorization of financial statements is made after this date, then in my view, it would not be justified and sensible to follow the omitted legislation and framework.
I hope this can help to understand.
Regards,
Kamran.
Prototype should be analysed in view of the criterion given in paragraph 57 in its sub-paras (a) to (f) as it is an internally generated/created design. PAC's book cannot be considered the bible for this purpose. However, there could be materially different professional views on the subject matter.
As far as Income Tax Ordinance, 2001 is concerned, it was promulgated when no development / improvement work was done on Companies ordinance and its schedules, as it was baiscally promulgated in 2001 although implemented in 2003. The companies amendment ordinance 2002 was issued during the month of October 2002 which was promulgated after the Income tax ordinance 2001 and was also a confused development on so many areas which were gradually amended and corrected afterwards. And this process is still going on.
There had been a very critical debate on the applicability of section 234 of the companies ordinace and its severe conflict with fifth scedule to the companies ordinance (before its current revisions). This prompted ICAP and SECP to take a corrective action which has resulted in current revision of fifth schedule and development of accounting standard on medium and small size entities.
As a matter of fact, professional opinion has since been evolved to amend and resemble the disclosures, methodologies and presentation with IFRSs. So manys started doing it well before the current change in fifth schdule and development of local standards.
The accounting and financial reporting standard for MSEs can be analysed to conclude that almost all the IFRSs have been used as a guideline to reach the conclusions and infact is only a Précis writing effort.
It is also our habit not to amend various laws to bring similarity and agreement among them. This cud be seen in so many cases. Thats why section 25 of ITO 2001 has not so far been amended even the revision of fifth schedule in August 2007.
In my view fifth schedule was basically purposed only for specifying disclosure requirements while for recognition and measurement we were always dependent upon Legal Generally Accepted Accounting Principles (Legal GAAP). And in Pakistan Legal GAAP (approved set of accounting standards) was only the IFRSs and other guidances as per CO84. After the amendment in CO 84 in 2002, in my view, it was quite sensible to follow as a general guideline what was being followed by listed companies for recognition and measurement purposes. Since the recognition and measurement as per legal GAAP was not allowing to defer the costs and expenditures, therefore, what was stipulated in disclosures list provided by the then Fifth schedule was almost redundant and irrelevant. This has been proved by the subsequent events.
Therefore, in my view, even in 2006 accounts, it is not sensible to follow the previous fifth schedule as it will lead to a change in accounting policy in the year 2007 and again the balance of any such outstanding deferal will have to be written off.
Further to above, as per standard for MSEs, an entity must observe the date of approval and authorization for issue of financial statements. Any thing or event before the date of authorization (normally Board meeting) of accounts is not considered as non adjusting event. The effective date of standard and revised schedule is not given in the notification which means that these are applicable from the date of issuance that almost falls in August 2007.
If the authorization of financial statements is made after this date, then in my view, it would not be justified and sensible to follow the omitted legislation and framework.
I hope this can help to understand.
Regards,
Kamran.