In addition to the present shortage of 25,000 qualified finance professionals, there will be a demand for 10 lakh accountancy-trained personnel in the next 10 years at a the junior level, says Mr Chandra Wadhwa, the newly elected President of the Institute of Cost and Works Accountants of India (ICWAI). "We are in the process of introducing a certificate course for Accounting Technicians to meet the shortage," he adds, speaking to Business Line.
A practising cost accountant in New Delhi, Mr Wadhwa is the Chairman of the Task Force formed by the Ministry of Corporate Affairs (MCA) for The Institute of Valuers, Member of the Committee formed by the Ministry of Commerce on Indo-UK Accountancy Sector, Member of the Committee formed by the MCA on Opening of Accountancy Sector in GATS regime, and Member of the Committee of CII on WTO.
Excerpts from an interview:
In what ways is the ICWAI different today from two decades ago?
Two decades ago cost accountancy was tied up with manufacturing. Today, cost management and strategic decision-making are in every aspect of manufacturing and service sectors. Under the WTO regime, world markets are getting integrated and cost and management functions will play decisive roles. With technology revolution in computers, the business environment has changed tremendously, widening the profession's reach and changing its focus.
What do you see as the impact of MDP?
In 2006, the Government amended the Cost and Works Accountants Act, 1959, the Chartered Accountants Act, 1949 and the Company Secretaries Act, 1980. The stage is now set for multidisciplinary partnership (MDP) firms with revenue, profit and fees sharing among professionals. Further, the concept of multidisciplinary partnership and services has been recognised in the LLP (Limited Liability Partnership) Bill 2006 introduced in Parliament. Once it becomes an Act, it will promote horizontal and vertical integration of various firms. I feel it offers a golden opportunity to cost accountants to venture into new areas with other professionals.
What are the new costing standards that the Institute is working on?
So far the Institute has issued six Cost Accounting Standards, namely, CAS-1 Classification of Cost, CAS-2 Capacity Determination, CAS-3 Overheads, CAS-4 Cost of Production for Captive Consumption, CAS-5 Average (Equalised) Cost of Transportation, and CAS-6 Determination of Arm's Length Price.
The Institute decided recently to focus on developing cost accounting standards. Issues such as joint product and by-product costs, segregation of input tax credits, research and development costs, cost aspects in inventory valuation and service costs have been identified by the Cost Accounting Standards Board.
Is the ICWAI currently studying any industry? Any research on the cement and steel industries which have been in the news lately?
The ICWAI is planning to benchmark different products in terms of cost, productivity, etc. For this purpose, our Council has constituted a Committee on Benchmarking, which will select the products to be benchmarked. No research work has been done on cement and steel industries but the Committee on Benchmarking will consider taking up these industries.
How actively are you in resisting foreign bodies such as the CIMA, London, from conducting exams in India?
As per the Cost and Works Accountants Act, no accounting body can award degree, diploma or certificate in cost management without affiliation to or recognition from our Institute. CIMA-UK began its activity in India, which we resisted. However, they have approached us for MRA (Mutual Recognition Arrangement), and we are currently considering their request.
Has the ICWAI name-change issue been resolved?
No, the issue is still unresolved. At present, cost and management accounting is no longer limited to manufacturing functions.
Do you think that investors' interests can be served better by new-age costing-related disclosures in annual reports?
Costing-related disclosure means a performance report that is not limited to financial results but includes in-depth analysis of efficiencies in critical areas. This can offer a better picture to the investors. New-age, costing-related disclosures such as product-wise margins, standard consumption norms, utility consumption, etc., would serve better the investors' interests.
Are the new economy products/services rightly priced? For example, telecom services. Are consumers overpaying because of lack of transparency of service costs?
In a liberalised economy, high-profit-yielding products or services attract other players, leading to competition. Individual service providers then attract customers by offering freebies and incentives. In the telecom sector, TRAI has introduced detailed cost audit as well as billing and metering audit for better transparency and "value for money" for consumers.
How can costing of public services be made more effective?
In the US, the UK and Canada, professionals are appointed for cost-auditing electricity, utilities, civic amenities, health and education. In India, this awareness is increasing and cost audit orders have been issued for electricity companies. The Institute has taken up cost studies of various public utility services.
Farm products haven't been priced efficiently enough to offer good returns to farmers. Do we cost farm products right? The problem may worsen with MNCs entering food, fruit, and vegetable retail.
Price rise in farm products is low compared to industrial products because farmers get subsidised inputs. The main reason for poor returns to farmers is because of the presence of middlemen and lack of a proper distribution network.
As agriculture is in the unorganised sector, proper costing has not been done. With the entry of MNCs into agricultural retailing, the problem will aggravate as they will buy products cheap, hoard them with advanced technology and sell at times of shortage to make huge profits.
On the road ahead.
A delegation from CIMA-UK and CMA-Canada visited India recently and we are working on entering into MRAs with them.
The MCA has hosted a concept paper on the Council of Valuation Professionals of India on its Web site, inviting comments from public. In the concept paper, our Institute has been considered as the Recognised Institute. By virtue of this recognition, our members will have an opportunity to opt for the new area of practice.
The ICWAI intends to introduce specialised post-qualification courses on Valuation, Financial Services, and Systems Audit for members.
We are organising a global summit on management accounting in January 2008 in Delhi where the father of Activity-Based Costing (ABC), Prof Robert Kaplan, will participate. Our co-hosts will be the institutes from Pakistan, Bangladesh and Sri Lanka, while IMA-US, CMA-Canada and CIMA-UK will be technical partners.
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