December 2001 Editorial Board
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VOL. XXXII ------,,......-__ DECEMBER 2001 EDITORIAL BOARD CHIEF EDITOR Dr. Nageshwar Rao Professor and Director, Pt. J. N. Institute of Bus. Management. Vikram Umve. sily. Ujjain EDITOR Dr. M.B. Shukla Professor. Dean and Director Faculty ofCommerce and Management. M.G. X.sbi Vidyapeetb. Varanasi ASSOCIATE EDITORS Dr. K.L. Jain Dr. P. Visbwanatbam HODr. Secretary General Reader in Commerce & Business Admn. Rajasthan Chamber ofComm. & Industry. Jaipur Andbra University. Vishakhapaatnam Dr. Du.za S. Govil Shri P.K. Jain Reader in Commerce Chief Manager Saurashtra University, Rajkol The Bank of Rajasthan Ltd .• M.1. Road. Jaipur ASSISTANT EDITOR Dr. B.V.R. Naidu Y.N. College. Sr. Faculty. Narsapur ADVISORS Dr. P. EdirisuriY8 Prof. B. Banerjee Prof. Bbagwati Prasad Monash Universty. Victoria calcutta University JCarnataka University A.J. Stagliano Prof. Y.P. Singh Prof. M.N.A. Ansari lea Raub SChool of BusL, Erivan Delhi UniveTSity Banans Hindu Univeristy Prof RisbLO Juurmaa Prof. Mafizoor Rahman Prof. G.C. Maheshwari USA Aligarh Muslim University M.s. University Prof. K. V. Sivayya PeJama Rajapakre Prof. Shanmukbsundaram Formerly, Clarkson University Giffith University, Brisbane Periyar University Prof. Mahendra K. Goyal Prof. K. Eresi Prof. S. Rathore Monash Universty, Melbourne Bangalore University Delhi University Prof. K.R Sharma Prof. RC. Xatiyar Prof. B. Ramesb Formerly at M.L.5. University 5,5. Sahu University Goa University Prof. B.S. Bhatia Prof. N.M. Khandelwal Prof. Subhasb Sbarma Punjabi University M.D.S. University G,N Dev University Prof. P.K. Misbra Prof. R.X. Mittsl Prof. I. V. Trivedi Barkatullah University Kuruksbetra University M.L.S. University rof. P. Khallu Rao Prof. Ranjan Bal Prof. U.C. Patnaik >ek Holding Co. Mumbai Utkal University Berhampur University alran Ahmed Dr. S.X. Das Prof. Micbael J.R GatrIkin Univeristy. Bundoora N.E. Hill University Univ. ofWollongong, Australia A.J. Stagliano Prof. Jeffery Kantor Prof. Dilip Kumar Sen .seph·s Philadelphia', University of Windsor International University of niv , Pennsylvania. USA Canada Business, Agri and Techno. Dbaka lsbton C. Bisbop Prof. Douglas K. Barney VJechson Univ., U.S A Indiana University. Indiana EDITORIAL New millennium is bringing new challenges to our accounting profession. y..T e have to restructure our accounting mechanism and techniques to meet the emerging requirements oftrade, industry an~ commerce. The Institute ofChartered Accountants of India and other professional bodies in the field of accounting is making all efforts to build its competencies. Members ofthe accounting discipline have to think deeper to get more closer to the complexities of real life complex situations. This issue ofthe journalis devoted to varied issues affecting accounting education and research. Dr. B. Banerjee has undertaken a study to study the corporate financial reporting practices with a sample size of 50 companies where in he has tried to see the practices ofIndian corporate sector regarding disclosure ofvoluntary and non voluntary information. Prof. H.C. Sardar and Deepak Thakkar have made a comparisonbetweenEVA and other performance indicators especially ROI. The paper has shown the comparison of ROI and EVA by using the historical and inflation adjusted figures. Dr. Hemendra Porwal and Sangeeta Porwal gave a detailed account of changing structure of financial statements in historical perspective. Keeping in mind the countries like India and Malaysia, they discussed present value techniques in accounting measurement. Dr. Lalit Gupta and Mrs. Vidhi Bhargave have given a vivid description at on going research efforts on the EVA. Newer areas of corporate social reporting were identified by Dr. Nour and Dr. Pramanik. Dr. Y.V. Reddy and Mr. R. Satish have made a study of 125 public ltd. companies to discuss disclosure practices related to EVA. Dr. Mohite, Sonar and Mohite have used structured frame wdrk of profit identity relationship to examine profitability ofurban cooperative bank. Empiricalevidences with respect to use of EVA was also shown by Dr. Saxena and Dr. Saini. 1.1.2002 Editors INDIAN ACCOUNTING ASSOCIATION PAST PRESIDENTS 1. Shri Raghunath Rai, Chartered Accountant, Varanasi 2. Dr. S.N. Sen (Late), Former Vice Chancellor, Calcutta University, Kolkata 3. Dr. S.K.R. Bhandari, FormerVice Chancellor, A.P.S. University, andFormerDean FMS, BHU, Varanasi 4. Dr. G.D. Roy (Late), Former Professor, Calcutta University, Kolkata 5. Shri M.C. Bhandari (Late), Chartered Accountant, Kolkata 6. Dr. K.S. Mathur, Former Professor, University ofRajasthan, Jaipur 7. Dr. R. Rajagopalan, Former Addl. Secretary, Gonvernment ofIndia, New Delhi 8. Dr. L.S. Porwal, Former Pofessor in Commerce, Delhi University, Delhi 9. Dr. H.C. Mehrotra, Ex Dean, Faculty ofCommerce, Agra University, Agra 10. Shri S.M. Dugar, Ex Member, Company Law Board, Government ofIndia, New Delhi 11. Dr. S.P. Gupta, Ex Dean, Faculty of Commerce, Rohikhand University, Barelly 12. Shri Sukumar Bhattacharya, Chartered Accountant, Kolkata 13. Dr. Dool Singh, Retd. Professor, Dean Management, Kurukshetra University, Kurukshetra 14. Dr. M.C. Khandelwal, Retd. Professor, DeanFaculty ofCommerce, University of Rajasthan, Jaipur 15. Dr. B. Banerjee, Professor of Commerce, Calcutta University, Kolkata 16. Dr. Chhote Lal, Ex Dean and Professor ofManagement, B.H.U., Varanasi 17. Dr. N.M. Khandelwal, Professor & Director, Faculty of Mgmt. Studies, M.D.S. University, Ajmer 18. Dr. U.L. Gupta, Retd. Professor& Dean Faculty ofCommerce, J.N.V. University, Jodhpur 19. Dr. K.R. Sharma, Retd. Professor, ChairmanFaculty & Dean, P.G. Studies, M.L.S. University, Udaipur 20. Dr. Bhagwati Prasad, Retd. Professor & Director, Kausali Institute of Mgmt., Karnataka University, Dharwar 21 Dr. Nageshwar Rao, Professor & Director, J.L. Nehru Institute of Business Management, Ex Dean FMS, Vikram University, Ujjain 22. Dr. B. Ramesh, Professor & Head, Deptt. of Commerce, Goa University, Goa 23. Prof. K. Eresi, Professor & Chairman, Faculty of Commerce, Bangalore University, Bangalore CONTENTS CORPORATE FINANCIAL REPORTING PRACTICES ININDIA 1-17 Dr. BhabatoshBanerjee ECONOMIC VALUE ADDED AND ROI :A Comparative Analysis 18-28 Prof. H.C. Sardar& DeepakJ. Thakkar PRESENTATION OF FINANCIAL STATEMENTS 29-36 Dr. Hemendra K. Porwal & Dr. Sangeeta Porwal EVA RESEARCH: A Review for Searching the Issues 37-53 Dr. Lalit Gupta & (Mrs.) VidhiBhargava NEW AREAS OF CORPORATE SOCIAL REPORTING 54-61 Dr. Abdul Naser I. Nour & Shri A.K. Pramanik ECONOMIC VALUE ADDED REPORTING IN INDIA 62-69 Dr. Y. V. Reddy & R. Satish PROFIT IDENTITY RELATIONSlllP 70-78 Dr. M.D. Mohite, Dr. S.O. Sonar & Shri V.M. Mohite EVA AS A TOOL OF SHAREHOLDERS VALUE CREATION 79-85 Dr. Pravin Saxena & Dr. P. D. Saini RETURN ON CAPITAL EMPLOYED IN HOTEL INDUSTRY 86-89 Dr. Ravi Kumar Jain BOOK REVIEW 90 • • • Indian Journal ofAccounting 1 Vol. XXXIIDecember2001 CORPORATE FINANCIAL REPORTING PRACTICES IN INDIA "'Dr. Bhabatosh Banerjee ABSTRACT Business rrrms communicate results oftheir operations and statement ofaffairs to various user-groups normally through annual accounts which comprise a number of financial statements andreports. The objectiveofrmancialreportingliesinprovidinginformation that is usefulinbusiness and economic decisions. Annual reports of 50 companies were taken as sample to study current financial reporting practices in India. The study has concluded that the quality of information provided by bigger companies has improved considerably. More and more additional voluntary information is being provided by big companies. 1. INTRODUCTION The regulation ofaccounting and reporting for producing quality accounting information and their disclosure in the annual accounts differ from country to , country. In India, accounting and reporting have to be in compliance with the provisions ofthe CompaniesAct, 1956, accounting standardsissuedbythe Institute of Chartered Accountants of India (lCAI) and the guidelines prescribed by the Securities and Exchange Board of India (SEBI) for listing agreement. Financial reporting has assumed a social function and the interests ofmany user groups are involved init. Needles to mention, overthe years, financial reportinghasundergone manychangestomeetthechangingsocietalrequirements. Theobjective ofthispaper isto examine whetherthe quantityand qualityofinformationdisclosed incompany annual reports have improved over the years and whether business enterprises are disclosing additional information voluntarily to meet the increasing demand ofthe users ofaccounts and ifso to what extent. Several studies (Dasgupta, 1977; ICAl, 1981, 1985; Lal, 1985, Banerjee, 1994; Chakravorty, 1994) have examined the corporate reporting practices in India. We also analyse the current reporting practices in the corporate sector as indicated by the reportingpracticesbya numberofselected companiesacrossvariousindustries for the financial year 2000-2001.Section 2 deals with methodology and selection of sample companies. The reporting practices are described in Section 3. In Section 4, we address the question why do companies disclose additional information "ProfessorofCommerce, UniversityofCalcuttaand former ChiefEditor, Indian JournalofAccounting 2 INDIANJOURNAL OFACCOUNTING voluntarily. The fmdings and limitations are summarized in the last section. II. Methodology TheSample: Annualreportsfor theyearended 31 stMarch, 2001 (i.e. fmancial year2000-2001) of50companieswere collected. These companieswere dividedinto two groups: Group A: 25 companies that form part