Nine months on, Satyam fraud still a riddle

Nine months after the Satyam scam, India’s biggest corporate fraud of $1.5 billion, the investigating agencies are yet to get their act together. On Sunday, corporate affairs minister Salman Khurshid said he was still awaiting the final report from accounting regulator Institute of Chartered Accountants of India (ICAI) on its version of how the fraud unfolded. “I don’t know why it (ICAI report) is not coming. I am not able to understand what the delay is about”, the minister told agencies.

But an FE investigation found out that the process of getting B Ramalinga Raju, former chief of erstwhile Satyam, to court to face final charges will take quite some time. This is because a lot of work is still pending with all the four agencies tasked to track the Satyam accounting fraud. These agencies are the Serious Fraud Investigation Office (SFIO), stock market regulator Securities and Exchange Board of India (Sebi), ICAI and the Central Bureau of Investigation (CBI).

So far, the only step taken by the government for Raju’s trail is the plan to set up a special court for Satyam in Hyderabad.

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Firms have to account for Foreign Currency Convertible Bonds premium each year

Companies that have raised debt by issuing foreign currency convertible bonds (FCCBs) would have to provide for the redemption premium in their books of accounts over the life of the instrument,according to the apex accounting regulator, Institute of Chartered Accountants of India(ICAI).

The move could dent the profitability of many of the over 130 Indian companies that have raised more than $20 billion(Rs 80,000 crore) in FCCBs over the last five years.

Most companies do not provide for the redemption premium on these bonds, arguing that these can always be converted into equity, thereby under reporting their true indebtedness and inflating profitability.

ICAI president Ved Jain told FE: "Law is very clear. If a company has issued FCCBs, with an undertaking that they can be either redeemed with a premium or converted into shares at a later date, then the company has to account for the premium now because it is a liability."

However, most Indian companies have not accounted for redemption premium payable if the bond is not converted, which they should ideally be writing off proportionately every year.

ICAI says that auditors will have to make adequate disclosures in case a company is not writing off the redemption premium. So, the onus of fulfilling the accounting norms would lie with the auditors.

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