BFS69 16 Aug, 2013 Weekly

th

www.learnwithflip.com

BFS Roundup @ FLIP

Updates @ FLIP
More than a thousand Bschoolers (from 60+ premier b-schools) have already enrolled for the FLIP National Challenge, a fiercely fought all India contest ; where B Schoolers write select FLIP Certifications, to benchmark themselves, against their peers. An All India Ranking will be given to the top 50 scorers. Besides a strong Campus placement edge, the contest also offers off campus placement benefits to the top 10 scorers. This includes PPIs, Internships, Career Talks, Mock Interviews, and Resume Counseling etc. to Power Your Placements Click here to attempt live interview simulations in the areas of capital markets, corporate banking, finance and banking (summers), to check your preparedness for placements Click here to see the complete details of the contest. FLIP - setting a BFS knowledge benchmark. CAD Jitters: Customs duty on gold, platinum and silver raised to 10% The government increased Customs duty on gold, platinum and silver to 10 per cent, in a move aimed at curbing the imports of these precious metals to limit its current account deficit. Jewellers criticized the move the saying that this will encourage gold smuggling and increase the prices. FLIPs View: These imports contribute a whopping 61% of the CAD. That is the concern. With the festival season coming up, one will need to track how price sensitive this market is, in India.

The week that was.

US says BofA lied to investors about mortgage-bond risks The US government has filed two civil lawsuits against Bank of America alleging the bank of investor fraud in its sale of $850 million of residential mortgage-backed securities. Bank of America is accused of making misleading statements and failing to disclose important facts about the pool of mortgages underlying` these securities. FLIPs View: This is not surprising, and the investors are also possibly to blame for not doing their due diligence. But given the low interest rates, and lack of alternate investments, it was easy for BofA to down sell these without adequate disclosures. -------------------------------------------------Companies Bill passed The much-awaited Companies Bill has been passed by Rajya Sabha. Now, only the Presidents assent will be required for it to become law. New bill includes reforms on CSR, corporate governance, investor protection etc. FLIPs View: 1956 was the last bill that tells you how long it takes to overhaul the system in India. A good step, with far reaching implications. The focus of the new bill is on governance and transparency. ---------------------------------------------------Japan's debt tops 1,000 trillion yen Japans national debt exceeded 1000 trillion yen for the first time. This exceeds the economies of Germany, France and the UK combined. FLIPs View: Thats over 10 trillion dollars. To put it in perspective the US is at 17 trillion, and is about 3 times larger than Japan. Unless Abe and Kurodas experiment of kick starting the economy pans out, the problem can only get worse.

www.learnwithflip.com

BFS Roundup @ FLIP

Did you know?
Indian rupee hit a record low of 61.80 against the USD recently. Some facts on the Indian rupee which you might find interesting: 1947: Indian rupee was linked to the British pound (GBP), and its value was at par with American dollar. Yes! 1 USD = 1 INR 1948-1966: Post-independence, India chose to adopt a fixed rate currency regime. The rupee was pegged at INR 4.79 against a dollar between 1948 and 1966. 1966: Two consecutive wars, one with China in 1962 and another one with Pakistan in 1965, resulted in a huge deficit on India's budget, forcing the government to devalue the currency to INR 7.57 against the dollar. 1971: The rupee's link with the British currency was broken, and it was linked directly to the US dollar. 1975: The Indian rupee was then linked to a basket of three currencies comprising the US dollar, the Japanese yen and the German deutschemark. The value of the Indian rupee was pegged at INR 8.39 against a dollar. 1985: Rupee was further devalued to INR 12 against the dollar. 1991:India faced a serious balance of payment crisis and was forced to sharply devalue its currency. The currency was devalued to INR 17.90 against a dollar. 1993: The exchange rate was freed, to be determined by the market, with provisions of intervention by the central bank under a situation of extreme volatility. In 1993, one was required to pay INR 31.37 to get a dollar. 2000-2010: The rupee traded in the range of INR 40-50. It was mostly at around INR 45 against a dollar. It appreciated to a high of INR 39 in 2007. The Indian currency has gradually depreciated since the global 2008 economic crisis. Analysts say that rupee may touch INR 63 against USD in next couple of months.

www.learnwithflip.com

BFS Roundup @ FLIP

Term of the Week

Revaluation Reserve
We receive a lot of queries on what are revaluation reserves, and their treatment in financial statements. Well try to explain revaluation reserves in this section. A business purchases fixed assets for production of goods or delivery of services. These include building, land, machinery etc. Fixed assets are recorded at their cost of acquisition in the financial statements. However over time, their value may change, due to various reasons. Revaluation is done to reflect these changes in the financial statements. When do we revalue assets? Primarily, revaluation of an asset is done to serve the following purposes: When a company wants to sell the asset. When a company wants to borrow against the asset. To give a better estimate on return on capital employed. In case of a merger or acquisition. What is revaluation reserve? When we revalue assets and find that there has been an increase in value. We need to increase the liabilities section by the same amount for the balance sheet to balance. Thus, we create a revaluation reserve under the reserves and surplus head (on the liabilities side), which contains the amount by which fixed assets have been increased (on the asset side), on revaluation. In case of a decrease in the value of an asset (apart from depreciation), we deduct the same from the revaluation reserves account. Note: Unlike other items under reserves and surplus, revaluation reserves are only paper or non-cash reserves. They do not imply any money stored with the organization. Hope that helps!

www.learnwithflip.com