ICAI to oppose Valuation Professionals Bill

THE government’s move to create a separate breed of corporate valuers in the country is set to face stiff resistance from the Institute of Chartered Accountants of India (ICAI), that trains and regulates the professional conduct of chartered accountants. The Institute is expected to tell the government that financial valuation of companies is best done by chartered accountants and this job be reserved for them. The government’s attempt is to institutionalise this profession with a well laid out code of conduct. It also wants to set up a panel of independent valuers that shareholders and clients would find credible. ICAI is now studying global valuation models, where CAs or their professional equivalents play the dominant role. The study results may be used to tell the government to reserve the work of financial valuation for CAs. The ministry of corporate affairs is expected to set up an expert panel to work out the modalities of a proposed law that will regulate the business of corporate valuation by creating a pool of government-recognised valuers. Even though the proposed panel of government-recognised valuers will comprise CAs in large numbers, the institute fears that such a move may affect its professional dominance, and also affect the quality of valuation work. Corporate valuation has always been a domain strength of chartered accountants because of their in-depth skills in auditing and finance. Corporate valuation is an essential part of initial public offerings, mergers and acquisitions, strategic corporate alliances and corporate restructuring. An official with ICAI said that world over, valuation of companies is done mainly by chartered accountants or certified public accountants (CPA), which is the statutory title of qualified accountants in the USA. The government’s expert panel that will decide on the draft valuation professionals bill is also likely to have representation from the ICAI, apart from other specialised bodies. The government intends to introduce the bill in the next session of Parliament, an official with the ministry of corporate affairs who did not want to be identified said. The proposed bill will seek to create a council of valuation professionals, which will set standards for the valuers, ensure for their training and monitor their performance.

Bonds

While you can probably pick up a lot about how the stock market works simply from following the news, the same cannot be said for the bond market. Because it is considered less exciting, the bond market doesn't get a lot of coverage. But it is essential that you understand the basics. Here are some of the most important bond-related terms.
Par Value
Par value is the amount that will be received at the time of maturity. It is also known as the principal, face value, or par value. Par value will vary depending on the type of bond. Most corporate bonds have a $1000 face value, while some government bonds will carry a much higher par value. Savings bonds can be purchased for sums under $100, so there is a wide variety of options. When the bond matures and the lump sum is returned, the debt obligation is complete. It is important to remember that bonds are not always sold at par value. In the secondary market, a bond's price fluctuates with interest
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rates. If interest rates are higher than the coupon rate on a bond, the bond will have to be sold below par value (at a "discount"). If interest rates have fallen, the price will be higher.
Maturity
Maturity is the length of time before the principal is returned on a bond. It is also called term-to-maturity. At the time of maturity, the issuer is no longer obligated to make interest payments. Maturities range significantly, from 1 month for some municipal notes to 40+ years for some corporate bonds. When evaluating your goals, keep in mind that bonds of different maturities will behave somewhat differently. For example, bonds with long-term maturities will be more sensitive to changes in interest rates. Shorter term bonds are more stable and, because you are more likely to hold it to maturity, are more predictable. There are some circumstances where a bond will be "called" before maturity .
Coupon
The coupon rate is the interest rate that is paid out to the bond holder. The name derives from the old system of payment, in which bond holders would need to
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send in coupons in order to receive payment. The coupon is set when the bond is issued and is usually expressed as an annual percentage of the par value of the bond. Payments usually occur every six months, but this can vary. If there is a 5% coupon on a $1000 face value bond, the bondholder will receive $50 every year. If two bonds with equal maturities and face values pay out different coupons, the prices of these bonds will behave differently in the secondary market. For example, the bond with a lower coupon rate will be less expensive because the bondholder is going to be getting more of his/her return from the return of principal at maturity than will the holder of a bond with a higher coupon. There are some bonds that do not pay out any coupons; these are called zero-coupon bonds .

Quote of the Day

Some people use one half their ingenuity to get into debt, and the other half to avoid paying it. - George D. Prentice

Arbitrator

Term of the Day - arbitrator
A private, neutral person chosen to arbitrate a disagreement, as opposed to a court of law. An arbitrator could be used to settle any non-criminal dispute, and many business contracts make provisions for an arbitrator in the event of a disagreement. Generally, resolving a disagreement through an arbitrator is substantially less expensive than resolving it through a court of law.

GOLDEN QUOTE

Ask someone to pick up your mail and daily paper when you’re out of town. Those are the first two things potential burglars look for.