How to improve my credit score

Your credit score influences your ability to get loan from Lenders. Your past financial goof ups will bring down your credit score. Transunion, Equifax, Experian are the major credit reporting agencies. Lenders pay these agencies to get the customer’s credit report. They use FICO score and its between 300 and 850. Higher the better. 5 top factors that affect credit score are Payment history, Length of credit history, New credit and credit mix. 800-850 consider to be excellent. 740-799 consider to be Very Good. 670-739 is good, 580-669 is not good and below 580 considered to be poor. If you credit score is bad, you may not get the loan or you may end up paying a high interest rate or unfavorable terms and conditions. Here are few things to improve your credit score. Pay your bill on time. If you miss this multiple time in an year, your credit score will be significantly impacted. Even if you pay that later, it will help to improve your credit score. Incase you missed the due date by a day or two, call up your banker and request them to remove from the report. They may not be able to do it, but worth trying. Keep your balance low. Total balance should not exceed 25 or 30 percent of your credit limit at any given time. For instance, if your credit card has a credit limit of $1000, use only $250 or 300.Try to clear the payment before due date and make it zero. Pay your balances in Full. Don’t just make the minimum due. Don’t move your debt around. Don’t try to be smart by clearing one credit by taking from another. It will not help to increase your score. Make sure you check your credit score atleast once a year. Report the reporting agencies if any discrepancy. There is no magic to improve your credit score in a day or two.

What is credit score

Credit score is the most important financial information about an individual in United States. When you apply for a new Credit Card, Mortgage loan and Car Loan the lender will check your credit score determine financial behavior. Transunion, Equifax, Experian are the major credit reporting agencies. Lenders pay these agencies to get the customer’s credit report. They use FICO score and its between 300 and 850. Higher the better. 5 top factors that affect credit score are Payment history, Length of credit history, New credit and credit mix. 800-850 consider to be excellent. 740-799 consider to be Very Good. 670-739 is good, 580-669 is not good and below 580 considered to be poor.

What is credit limit and Credit Line or Line of Credit

It indicates the maximum limit of credit that a bank or other lender gives to a customer.

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For More interview questions and latest updates...

For More interview questions and latest updates, Visit ... www.ibps-india.com

RBI Rates (Repo , reverse repo, CRR, SLR etc)

Always check the RBI website before the interview for latest rates.

http://www.rbi.org.in

On the right side of the main page, you'll see current rates.
Keep the mouse cursor to see the rates under each category

UCO Bank PO interview

Generally in interview Panel you'll have one representative from Bank, another one from different bank and you you'll have some one from Government sector companies (May be a college professor, Manager of some government organization etc). Panel may habe 3-4 members.

The questins may not be related to banking always. From my analysis, they ask one or two questions related to banking. Something like what's SLR, current repo rate, current account etc. It may not be a difficult question. They may also ask if you have a bank account, what kind of account is that, do you have debit card, master or visa, what is master or visa etc. How much is the maximum withdrawal from an ATM on a single day, what would be the chanrge if you withdraw from a different bank ATM etc.

Most of the other questions would be wiered at times. Interviewers may not expect you to give a correct answer, but they wanted to know how you tackle the question. For instance what is the name of species that sucks blood. Nobody can remember the name Hematophagy. If you do know well and and good. If you do not know, I feel you should not just answer I do not know. If you do that for one question, you are most likely end up in answering "i don't know " for most of the questions. You may answer like blood sucking animal genrellay termed as vampire animals, in collocial language it's called as bllod suckers (I do not know :-) or something like that, keep a smile on your face and you should look very pleasant even if the intervieweres are rude.

In another case, the question was why all the rivers are flowing from north to south. I don't know if that's true , but most of the rivers seem to be flowing from south to north. Nobody will have a clean answer for this question, but you can give some logical answers like magnetic pole or himalaya is on north etc etc.. They don't really care if you know the right answer, but they will check the way you answer and tackle the situation.

Women employees and especially married women can definitely expect question related to transfer and other challenges. You have to give some convoncinfg answer. It can be something like "we have brave women officers in indian army protecting our country from intruders. Army officer job is more life threatening and life challenging than a banking job. If a women can do that why not in bank". You can also mention that " you applied for this position after understanding all these challenges. There are challenges in every job and you have encounter the situation as and when it comes. I do have some plans now on how I'm going to manage for the next few years as I have my parrents ready to live with me. In future if this is not an option, I'll find alternatives". If you have woman interviewer in the panel, you can keep a smile on your face and say that "We have woman officers like you in the bank. They might have gone through the situation that I have to go through, I'll certainly get some advice from you once I join". You can also talk about woman empowerment etc.

There was also question about cabinet reshuffle. New minsters, names of minsters belonging to your state etc. FDI in retail, Kejriwal's new party etc also was some questions. There may be polotical questions as well, try to be diplomatic as much as you can. Try not to name political party or individual leaders with name. Instead use ruling party, opposition, opposition leader, speaker etc. Be careful when it comes to religious topics. These are sensitive areas, careful in answering. For instance if someone ask you "do you think Modi is a right candidate for PM ". Depending on your answer, they'll get into the riots Gujrat etc. You have to control the questions by giving the close ended answer. I wpould answer something like "In a democratic country like india people of the country will decide if he's a right candidate for PM". "It's his party who needs to analyse his performnace and decide if he's the right person for PM". I as an idnvidual will cast my vote based on my analysis and political ideology. About the incident of riots, you can mention "any act violence is condemnable. Whoever did the crime will be booked and punished as per the indian legal system. It's the investigation agency who needs to investigate of any individuals involvement and finally it's the hon. supreme court give the verdict". "as this matter is still in the court and being investigated I do not want to comment"

Latest RBI Rates as on 12/12/12

Bank Rate: 9%

Repo Rate: 8%

Reverse Repo Rate: 7%

Marginal Standing Facility Rate: 9%

CRR : 4.25%

SLR: 23%

Base Rate: 9.75%-10.5%

Saving Deposit Rate: 4%

Term Deposit Rate: 8.5% - 9%

Dena Bank Questions

Tell about RBI,Its major functions & whether RBI creates credit?

Who prepares budget for Govt. of India (which division within Finance Dept)?  

What are its objectives?

What is FDI?

How does it differ from FII?

  

What is plastic money?

What is difference between Debit card and credit card?

Syndicate Bank PO questions

What is a bank and its functions?

What is bill of exchange?

What is BRA stands for and when it was formed?

When was company’s act framed?

Chief Justice of India, governor of the state and couple of neighbouring states?

Chief Election commissioner?

What are the essential things to open a bank account?

Do you have a bank account, which bank, what type of account, what’s the interest rate?

What’s money laundering?

SIDBI and it’s functions?

Some of the tricky questions

why most of the rivers and flowing from north to south.
don't know. It could be due to eart rotation or magnetic force or the geographical reason. will check and update.

why rain fall in delhi at this hot summer.
Not sure, will check and update.

They will start saying, 'I woke up at night hearing a loud noice'.. you'll have to continue with the story.
you can say that you ' I went outside and there was a car crash. Couple of them were injured and there was noone on the road to rescue. I went outside, took the injured to the hospital. Their life was saved. Called up the police and reported the crash. Came back home and slept peacefully.

These question are asked to check your logic, attitude, convincing ability, situation handling, quick thinking etc. Many questions will be irrelevant and you don't necessarily need to know the correct answer, but you should be able to tackle the question instead of just saying "don't know the answer". Your smartness in handling the situation is very important.

Difference between BOP and BOT

will be updated soon

Canara Bank PO Interview

Canara Bank had Group Discussion before Interview.

Topics were given to the candidates and then 5 minutes to prepare.
3 minutes were given to each candidates talk about their points.
At the end, 5 minutes for discussion.
Below are some of the topics given.

1) Fast change in IT- a Boon or curse
2) Nuclear power-safe/ unsafe
3) Is 5 days of working in banking disirable?
4) Computer is dehumanizing the society?
5) is there a need for so many nationalised banks in india?

Below are some of the topics that can be asked.

-Is dependence on computers a good thing?
-Should the public sector be privatized?
-The education system needs serious reforms
-Developing countries need trade, not aid
-Globalization is good for developing countries
- Foreign direct investment (FDI) in retail sector.
- Corruption is the main outcome of democracy in India.
-Women's empowerment will lead to social development.
-Computers result in unemployment
-Youth in India are becoming greedy by the day
-western culture adopted by india fair or not?
-Mobile phone a ban or a boon.
-Education and Success - Is There A Correlation?
-Social network Boon or Ban.
-Advertising is all glitter and little truth.
-Women reservation in parliament is against the tenets of democracy.
-Computers result in unemployment.
-Economic development at the cost of Ecological Degradation

Interview questions:
1) About Budget
2) Taxes- what's STT
3) Share Market
4) Money laundering
5) financial inclusion
6) ICICI and HDFC bank chairman
7) Financae minister (central&state), finance secratary
8) No frill account
9) Bank rate, repo, reverse repo, types of accounts
10) body shopping?
11) question related to IPL, IT depending on your qualifcation and hobby.

Repo rate reduced

Repo rate is reduced by .5 points today to 8. This is the first time in last 2 years repo rate is reducing.

CRR reduced

March 9, 2012: RBI has cut Cash Reserve Ratio (CRR) by 0.75 per cent to 4.75 per cent.

Disinvestment

In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm. A divestment is the opposite of an investment.

Motives:

Firms may have several motives for divestitures.

First, a firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best. For example, Eastman Kodak, Ford Motor Company, and many other firms have sold various businesses that were not closely related to their core businesses.

A second motive for divestitures is to obtain funds. Divestitures generate funds for the firm because it is selling one of its businesses in exchange for cash. For example, CSX Corporation made divestitures to focus on its core railroad business and also to obtain funds so that it could pay off some of its existing debt.

A third motive for divesting is that a firm's "break-up" value is sometimes believed to be greater than the value of the firm as a whole. In other words, the sum of a firm's individual asset liquidation values exceeds the market value of the firm's combined assets. This encourages firms to sell off what would be worth more when liquidated than when retained.

A fourth motive to divest a part of a firm may be to create stability. Philips, for example, divested its chip division called NXP because the chip market was so volatile and unpredictable that NXP was responsible for the majority of Philips's stock fluctuations while it represented only a very small part of Philips NV.

A fifth motive for firms to divest a part of the company is that a division is under-performing or even failing.

A sixth reason to divest could be forced on to the firm by the regulatory authorities, for example in order to create competition.

Securitization

Securitisation is the process of conversion of existing assets or future cash flows into marketable securities. In other words, securitisation deals with the conversion of assets which are not marketable into marketable ones.

For the purpose of distinction, the conversion of existing assets into marketable securities is known as asset-backed securitisation and the conversion of future cash flows into marketable securities is known as future-flows securitisation.

Some of the assets that can be securitised are loans like car loans, housing loans, et cetera and future cash flows like ticket sales, credit card payments, car rentals or any other form of future receivables.

Suppose Mr X wants to open a multiplex and is in need of funds for the same. To raise funds, Mr X can sell his future cash flows (cash flows arising from sale of movie tickets and food items in the future) in the form of securities to raise money.

This will benefit investors as they will have a claim over the future cash flows generated from the multiplex. Mr X will also benefit as loan obligations will be met from cash flows generated from the multiplex itself.

CRR reduced by 0.5 points today, 23rd Jan

Current CRR is 5.5, it was 6 earlier. Repo, Reverse repo etc remains the same

Money Laundering

Money laundering refers to the process of concealing the source of illegally obtained money. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy. In 1996 the International Monetary Fund estimated that two to five percent of the worldwide global economy involved laundered money. However, the FATF, an intergovernmental body set up to combat money laundering, admitted that "overall it is absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF does not publish any figures in this regard."[1] Academic commentators have likewise been unable to estimate the volume of money with any degree of assurance.[2]

Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments.[2] As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved.

But in simple terms it is the Conversion of Black money into white money. This takes you back to cleaning the huge piles of cash. Indian newspapers frequently report the money laundering scams perpetrated by the Political leaders and some of the prominent stars are the chief ministers of UP, Punjab and Kerala. UP chief minister ms. Mayawati as per the Indian Express reports used some innovative techniques to launder the money by avoiding the tax in legitimate manner. She accepted the donations from persons who were road side heroes. When CBI raided these guys were found in no position to donate huge sums for political motives.

Other Indian star in the laundering Business is Ketan Parekh.It is believed that he shifted the proceeds of money received from the BoI pay order scam to various tax heavens and ultimately in the Swiss Banks.These transactions are believd to be just the tip of the iceberg.

If done successfully, it allows the criminals to maintain control over their proceeds and ultimately to provide a legitimate cover for their source of income. Money laundering plays a fundamental role in facilitating the ambitions of the drug trafficker, the terrorist, the organised criminal, the insider dealer, the tax evader as well as the many others who need to avoid the kind of attention from the authorities that sudden wealth brings from illegal activities. By engaging in this type of activity it is hoped to place the proceeds beyond the reach of any asset forfeiture laws.

US GAAP v/s Indian GAAP

In the U.S., Generally Accepted Accounting Principles are accounting rules used to prepare, present, and report financial statements for a wide variety of entities, including publicly traded and privately held companies, non-profit organizations, and governments. The term is usually confined to the United States; hence it is commonly abbreviated as US GAAP or simply GAAP. However, in the theoretical sense, Generally Accepted Accounting Principles encompass the entire industry of accounting, and not only the United States. Outside the academic context, GAAP means US GAAP.

Similar to many other countries practicing under the common law system, the United States government does not directly set accounting standards, in the belief that the private sector has better knowledge and resources. US GAAP is not written in law, although the U.S. Securities and Exchange Commission (SEC) requires that it be followed in financial reporting by publicly traded companies. Currently, the Financial Accounting Standards Board (FASB) is the highest authority in establishing generally accepted accounting principles for public and private companies, as well as non-profit entities. For local and state governments, GAAP is determined by the Governmental Accounting Standards Board (GASB), which operates under a set of assumptions, principles, and constraints, different from those of standard private-sector GAAP. Financial reporting in federal government entities is regulated by the Federal Accounting Standards Advisory Board (FASAB).

The US GAAP provisions differ somewhat from International Financial Reporting Standards (IFRS), though former SEC Chairman Christopher Cox set out a timetable for all U.S. companies to drop GAAP by 2016, with the largest companies switching to IFRS as early as 2009.[1]

There are significant differences between Indian GAAP and US GAAP.  US GAAP stipulate stringent accounting treatment as well as disclosure norms, whereas their Indian GAAP in many cases have relaxed requirements ( AS 18,17,AS 3). Similarly, there are several areas where no Accounting Standard have been issued by ICAI . These differences lead to wide variations when Financial Results of Indian Companies are computed under US GAAP and it is found that Profits computed under US GAAP are generally lower 

Some of these major differences between US GAAP and Indian GAAP which  give rise to differences in profit are highlighted hereunder:

1.      Underlying assumptions: Under Indian GAAP, Financial statements are prepared in accordance with the principle of conservatism which basically means “Anticipate no profits and provide for all possible losses”. Under US GAAP conservatism is not considered, if it leads to deliberate and consistent understatements.

2.      Prudence vs. rules : The Institute of Chartered Accountants of India (ICAI)  has been structuring Accounting Standards based on the International Accounting Standards ( IAS) , which employ concepts and `prudence' as the principle in contrast to the US GAAP, which are  "rule oriented", detailed and complex. It is quite easy for the US accountants to handle issues that fall within the rules, while the International Accounting Standards provide a general framework of accounting standards, which emphasise "substance over form" for accounting. These rules are less descriptive and their application is based on prudence. US GAAP has thus issued several Industry specific GAAP , like SFAS 51 ( Cable TV),  SFAS 50 (Record and Music Industry) , SFAS 53 ( Motion Picture Industry) etc.

3.      Format/ Presentation of financial statements: Under Indian GAAP, financial statements are prepared in accordance with the presentation requirements of Schedule VI to the Companies Act, 1956. On the other hand , financial statements prepared as per US GAAP are not required to be prepared under any specific format as long as they comply with the disclosure requirements of US  GAAP. Financial statements to be filed with SEC include

4.      Consolidation of subsidiary companies: Under Indian GAAP (AS 21), Consolidation of Accounts of subsidiary companies  is not mandatory. AS 21 is mandatory if an enterprise presents consolidated financial statements. In other words, the accounting standard does not mandate an enterprise to present consolidated financial statements but, if the enterprise presents consolidated financial statements for complying with the requirements of any statute or otherwise, it should prepare and present consolidated financial statements in accordance with AS 21.Thus, the   financial income of any  company taken in isolation neither reveals the quantum of business between the group companies nor does it reveal the true picture of the Group . Savvy promoters   hive off their loss making divisions into separate subsidiaries, so that financial statement of their Flagship Company looks attractive .Under US GAAP (SFAS  94),Consolidation of results of Subsidiary Companies  is mandatory , hence eliminating  material, inter company transaction  and giving a true picture of the operations and Profitability of the various majority owned Business of the Group.

5.      Cash flow statement: Under Indian GAAP (AS 3) , inclusion of Cash Flow statement in financial statements is mandatory only for  companies whose share are listed on recognized stock exchanges and Certain enterprises  whose turnover for the accounting period exceeds Rs. 50 crore. Thus , unlisted companies escape the burden of providing  cash flow statements as part of their financial statements. On the other hand, US GAAP (SFAS 95) mandates furnishing of cash flow statements for 3  years – current year and 2  immediate preceding years irrespective of whether the company is listed or not .

6.      Investments: Under Indian GAAP (AS 13), Investments are classified as Current and Long term. These are to be further classified Government or Trust securities ,Shares, debentures or bonds Investment properties Others-specifying nature. Investments classified as current investments are to  be carried in the financial statements at the lower of cost and fair value determined either on an individual investment basis or by category of investment, but not on an overall (or global) basis. Investments classified as long term investments are  carried in the financial statements at cost. However, provision for diminution is to be  made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.   Under US GAAP ( SFAS 115) ,  Investments are required to be segregated in 3 categories i.e. held to Maturity Security ( Primarily Debt Security) , Trading Security and Available for sales Security and should be further segregated as Current or Non current on Individual basis.  Debt securities that the enterprise has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealised gains and losses included in earnings. All Other securities  are classified as available-for-sale securities and reported at fair value, with unrealised gains and losses excluded from earnings and reported in a separate component of shareholders' equity

7.      Depreciation: Under the Indian GAAP, depreciation is provided based on rates prescribed by the Companies Act, 1956.  Higher depreciation provision based on estimated useful life of the assets is permitted, but must be disclosed in Notes to Accounts.( Guidance note no 49) . Depreciation cannot be provided at a rate lower than prescribed in any circumstance. Similarly , there is no compulsion to provide depreciation at a higher rate, even if the actual wear and tear of the equipments is higher than the rates provided in Companies Act. Thus , an Indian Company can get away with providing with lesser depreciation , if the same is in compliance to Companies Act 1956. Contrary to this, under the US GAAP , depreciation has to be provided over the estimated useful life of the asset, thus making the Accounting more realistic and providing sufficient funds for replacement when the asset becomes obsolete and fully worn out.

8.      Foreign currency transactions:  Under Indian GAAP(AS11) Forex transactions ( Monetary items ) are recorded at the rate prevalent on the transaction date .Year end foreign currency assets and liabilities ( Non Monetary Items) are re-stated at the closing exchange rates. Exchange rate differences arising on payments or realizations and restatements at closing exchange rates are treated as Profit /loss in  the income statement.   Exchange fluctuations on liabilities incurred for fixed assets can be capitalized. Under US GAAP (SFAS 52), Gains and losses on foreign currency transactions are generally included in determining net income for the period in which exchange rates change unless the transaction hedges a foreign currency commitment or a net investment in a foreign entity . Capitalization of exchange fluctuation arising from foreign liabilities incurred for acquiring fixed assets does not exist. Translation adjustments are not included in determining net income for the period but are disclosed and accumulated in a separate component of consolidated equity until sale or until complete or substantially complete liquidation of the net investment in the foreign entity takes place . US GAAP also permits use of Average monthly Exchange rate for Translation of Revenue, expenses and Cash flow items, whereas under Indian GAAP, the closing exchange rate for the Transaction date is to be taken for translation purposes.

9.      Expenditure during Construction Period: As per the Indian GAAP (Guidance note on ‘Treatment of expenditure during construction period' ) , all incidental expenditure on Construction of Assets during Project stage  are accumulated and allocated to the cost of asset on completion of the project. Contrary to this, under the US GAAP (SFAS 7) , such  expenditure are  divided into two heads – direct and indirect. While, Direct expenditure is accumulated and allocated to the cost of asset, indirect expenditure are charged to revenue.

10.   Research and Development expenditure: Indian GAAP ( AS 8)   requires research and development expenditure to be charged to profit and loss account, except equipment and machinery which are capitalized and depreciated. Under US GAAP ( SFAS 2)  , all R&D costs are expenses except intangible assets purchased from others and Tangible assets that have alternative future uses which are capitalised and depreciated or amortised as R&D Expense. Under US GAAP, R&D expenditure incurred on software development are expensed until technical feasibility is established ( SOP 81.1) . R&D Cost and software development cost incurred under contractual arrangement are treated as cost of revenue.

11.   Revaluation reserve : Under Indian GAAP, if an enterprise needs  to revalue its asset due to increase in cost of replacement and provide higher charge to provide for such increased cost of replacement, then the Asset can be revalued upward and the unrealised gain on such revaluation can be credited to Revaluation Reserve ( Guidance note no 57). The incremental depreciation arising out of  higher book  value may be adjusted against the Revaluation Reserve by transfer to P&L Account.  However for window dressing some promoters misutilise this facility to hoodwink  the shareholders on many occasions. US GAAP does not allow revaluing upward property, plant and equipment or investment.

12.   Long term Debts: Under US GAAP , the current portion of long term debt is classified as current liability, whereas under the Indian GAAP, there is no such requirement and hence the interest accrued on such long term debt in not taken as current liability.

13.   Extraordinary items, prior period items and changes in accounting policies: Under  Indian GAAP( AS 5) , extraordinary items, prior period items and changes in accounting policies are disclosed without netting off for tax effects . Under US GAAP (SFAS 16) adjustments for tax effects are required to be made while reporting the Prior period Items.

14.     Goodwill: Under the Indian GAAP goodwill is capitalized and charged to earnings over 5 to 10 years period. Under US GAAP ( SFAS 142) ,  Goodwill and intangible assets that have indefinite useful lives are not  amortized ,but they are  tested at least annually for impairment using a two-step process that begins with an estimation of the fair value of a reporting unit. The first step is a screen for potential impairment, and the second step measures the amount of impairment, if any. However, if certain criteria are met, the requirement to test goodwill for impairment annually can be satisfied without a remeasurement of the fair value of a reporting unit.

15.     Capital issue expenses: Under the US GAAP, capital issue expenses are required to be written off when incurred against proceeds of capitals, whereas under Indian GAAP , capital issue expense can be amortized or written off against reserves.

16.     Proposed dividend: Under Indian GAAP , dividends declared are accounted for in the year to  which they relate. For example, if dividend for the FY 1999-2000 is declared in Sep 2000 , then the corresponding charge is made in  2000-2001 as below the line item . Contrary to this , under US GAAP dividends are reduced from the reserves in the year they are declared by the Board. Hence in this case under US GAAP , it will be charged  Profit and loss account of 2000-2001 above the line.

17.     Investments in Associated companies: Under the Indian GAAP( AS 23) ,  investment in associate companies is initially recorded at Cost using the Equity method whereby the investment is initially recorded at cost, identifying any goodwill/capital reserve arising at the time of acquisition. The carrying amount of the investment is adjusted thereafter for the post acquisition change in the investor’s share of net assets of the investee. The consolidated statement of profit and loss reflects the investor’s share of the results of operations of the investee.are carried at cost . Under US GAAP ( SFAS 115)  Investments in Associates are accounted under equity method in Group accounts but would be held at cost in the Investor’s own account.

18.     Preoperative expenses: Under Indian GAAP, (Guidance Note 34 - Treatment of Expenditure during Construction Period), direct Revenue expenditure during construction period like Preliminary  Expenses, Project related expenditure are allowed to be Capitalised.  Further , Indirect revenue expenditure incidental and related to Construction are also permitted to be capitalised. Other Indirect revenue expenditure not related to construction, but since they are incurred during Construction period are treated as deferred revenue expenditure and classified as Miscellaneous Expenditure in Balance Sheet and written off over a period of 3 to 5 years. Under US GAAP ( SFAS 7)  , the concept of preoperative expenses itself doesn’t exist. SOP 98.5 also madates that all Start up Costs should be expensed. The enterprise has to prepare its balance sheet and Profit and Loss Account as if it were a normal running organization.  Expenses have to be charged to revenue and Assets are Capitalised as a normal organization.  The additional disclosure include reporting of cash flow, cumulative revenues and Expenses since inception. Upon commencement of normal operations, notes to Statement should disclose that the Company was but is no longer is a Development stage enterprise. Thus , due to above accounting anomaly, Accounts prepared under Indian GAAP , contain  higher charges to depreciation which are to be adjusted suitably under US GAAP adjustments for indirect preoperative expenses and foreign currencies.

19.     Employee benefits: Under Indian GAAP, provision for leave encashment is accounted based n actuarial valuation. Compensation to employees who opt  for voluntary retirement scheme can be amortized over 60 months.  Under US GAAP, provision for leave encashment is accounted on actual basis. Compensation towards voluntary retirement scheme is to be charged in the year in which the employees accept the offer.

20.     Loss on extinguishment of debt: Under Indian GAAP, debt extinguishment premiums are adjusted against Securities Premium Account. Under US GAAP, premiums for early extinguishment of debt are expensed as incurred.