JCA News 2011: Winter Edition

2011: Winter Edition | Vol. 1 – No. 4

RAKIA: Creating Industrial “clusters” is an Integral Part of our Strategy

IFRS 9: Financial Instruments (Replacement of IAS 39)

KSA: The Most Liberal Commercial Agency Law of the Gulf

Mergers & Acquisitions

Amendments in the Indian Trademark Rules

Creativity City – Fujairah

Audit Consideration in Respect to a Going Concern in the Current Economic Environment

IN THIS ISSUE

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03 Chairman's Message

04 Expert View

05 IFRS 9 Financial Instruments (Replacement of IAS 39)

06 KSA: The Most Liberal Commercial Agency Law of the Gulf

07 Mergers & Acquisitions

Amendments in the Indian Trademark Rules

09 Inside Jitendra Group

10 (a) Doing Business in UAE Update

(b) Audit Consideration in Respect to a Going Concern in the Current Economic Environment

11 Directory

08

RAKIA: Creating Industrial “clusters” is an Integral Part of our Strategy, Dr. Khater Massaad CEO, RAKIA

Mr. Atul Shukla – Audit Partner

Mr. Jochen Hundt LL.M. – Member of JCA InternationalPartner, Head of InternationalAl-Soaib Law Firm, KSA

Mr. Anees Paliwala - Auditor

Mr. Roouchak Saxena – Legal Consultant

EventsAppointments

Creative City - FujairahMr. Manish Gupta – Manager Business Advisory Services

Mr. Tariq Afroze – Auditor

CONTENTSCONTENTS

For comments, suggestions and advertisements, please contactMr. Noel C. Aponte Jr. - Marketing Assistant

E-mail: Follow us on Twitter:

Tel: +971 4 3438022

[email protected]://twitter.com/jcaservices

RMember of

l

Diligence

lInternal and Management Audit

lCompliance Audit

lAccounts Outsourcing

lCompany Formations (L.L.C., Offshore and Free Zones)

lArranging Credit and Loan Facilities from the Banks

lLiquidation of Companies

lH.R. Consultancy

lManagement Consultancy

lTrademark and Patent Registration Worldwide

lBusiness Advisory

External Audit, Assurance and Due

Our main areas of services are:

Jitendra Gianchandani, FCA Chairman and Managing Partner

Jitendra Consulting Group www.cajitendra.com

http://blogcajitendra.com

Email : [email protected]

CHAIRMAN’S MESSAGECONTENTSCHAIRMAN’S MESSAGE

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A very Happy New Year to everyone. We are proud

to bring to you the Winter 2011 edition of our newsletter. It has been our constant endeavor to acquaint our readers with the latest developments, such that have even led the IMF to state that Dubai's economy will be witnessing an upward trend. The International Monetary Fund has announced that bouncing back from previous year's contraction of around 1.3 percent; the Emirate's economy can expect a growth of about 1 percent. This growth can essentially be attributed to the amplified external demand in case of trade, tourism and logistics.

On another note, while welcoming the President of India, on her visit to the UAE, our partner Ms. Divya Gianchandani also commented on the recent changes in the Direct Tax Code in India and how it has become an impediment to NRIs who want to invest in India “in a meaningful way”.

In keeping with the developments that have led to steady progress and to keep our readers up-to-date on the latest in trademark registration and the IFRS, we proudly present the Trademark Registration Pocketbook and the IFRS Pocketbook. These pocketbooks include a quick overview of the most recent developments, FAQs and general guidelines in case of each of their regulations.

In this edition of News & Views, we bring to you the reasons why you should keep an eye on Fujairah's Creative City and how it shall be beneficial to those involved in media-related services. The article on the amendments made to the Indian Trademark Rules shall help you gain a quick synopsis of the changes introduced to the fourth schedule and their consequences.

The IFRS-9 article is intended to acquaint you to the salient features and scope of the IFRS that has now completely replaced IFRS-39 on Financial Instruments Recognition and Measurement. While the Mergers & Acquisitions informative piece should help you understand the basic differences between mergers and acquisitions and their financial treatment, the article on audit considerations in respect to a going concern in today's economic environment explains the management's and auditor's duties regarding the same.

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A few of the European countries that registered with RAKIA in 2009 include Pikko, the steel connectors from Finland; Maico Gulf, a ventilation systems company from Germany; Becker Paints, a French paints manufacturer; Novas Sealing, a supplier of industrial gaskets from the UK; Austrian kitchen products company Franke; Duscholux, a sanitaryware fittings firm from Germany; Arc International, a tableware company from France; and Kludi RAK from Germany, which supplies water taps and faucets.

3) How would you describe the economic relationship between the two emirates, moving forward?

As I have said, the different emirates of the UAE always try to complement each other to promote national interest. Also, we have much to gain as a nation and as individual emirates if we build on our respective strengths and try to support each other's economic growth initiatives. It is true that Dubai is more popular but I believe that Ras Al Khaimah is gaining solid ground because of the proactive efforts of the government to establish a business-friendly environment through various business incentives. Moreover, I think we have also benefited from our proximity to Dubai, while Ras Al Khaimah has also done a great job in marketing itself among global investors. These factors I believe have elevated Ras Al Khaimah to a more competitive position compared with the other emirates.

4) Did the world economic crisis force RAKIA to reassess its long-term strategy - in terms of the kind of business it wants to attract to the emirate?

The global downturn has given us the opportunity to focus more on local development projects and to further strengthen the emirate's business policies and infrastructure. At the same time, we remain committed to cater to a wider range of business sectors in line with the economic diversification strategy being adopted by the emirate. We believe that the global recession has made Ras Al Khaimah a much more attractive investment base because the emirate offers concrete advantages in terms of costefficiency and value added services and business facilities. It is thus only natural that we redirect our resources and investments towards building a more robust business landscape, while limiting our participation in international projects.

Dr. Khater Massaad – CEORas Al Khaimah Investment Authority

1) RAKIA has been very successful in attracting a range of industries as investors. In terms of creating synergies - even in the future moving t o w a r d a ' c l u s t e r ' strategy, which areas do you see as possible priorities?

Industrial clustering is an integral part of our strategy, which we aim to achieve by building on the emirate's strategic advantages such as its centralised location in the region and its growing reputation as a major import and export hub. Establishing clusters offers a number of benefits for investors such as economies of scale, easy access to services tailored to industry, and opportunities for collaboration to compete globally.

The clusters that have been initially identified are food, chemical, plastic and rubber, non-metallic mineral, primary metal, fabricated metal, transportation, logistics; business park, R&D and local centre; and electrical equipment, appliance and component.

2) World's financial troubles in 2009 are well documented. What kind of fall-out have they had on the economy of RAKIA?

Ras Al Khaimah works on a totally different playing field, building its own strong foundation for its economy by becoming a major producer of ceramics, cement and pharmaceuticals in addition to ongoing development initiatives in other sectors such as agr icu l ture , t ransport , ser v ices , tour i sm, mining/quarrying, manufacturing and trade. While we have been actively investing in infrastructure and real estate development projects, we remain relatively more conservative in these areas compared with our neighbours in Dubai as it has been our strategy to complement the growth initiatives of other emirates in the UAE. In 2009, RAK's GDP increased by up to 9 per cent, so it is clear that Ras Al Khaimah has maintained a healthy growth trajectory and has successfully shielded itself from any major fall out from the problems that have affected economies around the world. In fact, we have been attracting investors from Europe in recent years, even at the height of the global meltdown.

EXPERT VIEW-RAKIA: Creating industrial "clusters" is an integral part of our strategy.

We invite reader’s queries for audit related issues on email: [email protected]

IFRS 9IFRS 9: Financial Instruments (Replacement of IAS 39)

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(TOTAL REPLACEMENT OF IFRS 39- FINANCIAL INSTRUMENTS-RECOGNITION AND MEASUREMENT)

The IASB has issued IFRS 9 - Financial Instruments, so as to replace IAS 39 - Financial Instruments: Recognition and Measurement. This is a very important milestone in the development of IFRS.

IFRS 9 introduces new requirements for classifying and stmeasuring financial assets that must be applied beginning 1 of

January, 2013, with the option for early adoption permitted. For all practical purposes, companies will start following IFRS-9 from the next financial year onwards.

The IASB intends to expand IFRS 9 to add new requirements for classifying and measuring financial liabilities, derecognition of financial instruments, impairment, and hedge accounting. By the end of 2010, IFRS-9 will be a complete replacement of the IAS 39.

SALIENT FEATURES OF IFRS-9

Initial measurement of financial assets

All financial assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

Subsequent measurement of financial assets

IFRS 9 divides all financial assets that are currently within the scope of IAS 39 into two classifications – those measured at amortised cost and those measured at fair value. Classification is made at the time the financial asset is initially recognised, namely, when the entity becomes a party to the contractual provisions of the instrument.

Debt Instruments

A debt instrument that meets the following two conditions can be measured at amortised cost (net of any write down for impairment):

Business model test. The objective of the entity's business model is to hold the financial asset to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).

Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding.

All other debt instruments must be measured at fair value through profit or loss (FVTPL).

Fair value option

Even if an instrument meets the two amortised cost tests, IFRS 9 contains an option to designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch'), which would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

The available-for-sale (AFS) and held-to-maturity (HTM) categories currently in IAS 39 are omitted in IFRS 9. Equity instruments

All equity investments within the scope of IFRS 9 are to be measured at fair value in the balance sheet, with value changes recognised in profit or loss, except for those equity investments for which the entity has elected to report value changes in 'other comprehensive income'. There is no 'cost exception' for unquoted equities.

'Other comprehensive income' option

If an equity investment is not held for trading, an entity can make an irrevocable election at initial recognition to measure it at fair value through other comprehensive income (FVTOCI) with only dividend income recognised in profit or loss.

Measurement guidance

Despite the fair value requirement for all equity investments, IFRS 9 contains guidance on when the cost may be the best estimate of fair value and also when it might not be representative of the fair value.

Derivatives

All derivatives, including those linked to unquoted equity investments, are measured at fair value. Value changes are recognised in profit or loss, unless the entity has elected to treat the derivative as a hedging instrument in accordance with IAS 39, in which case the requirements of IAS 39 apply.

Reclassification

For debt instruments, reclassification is required between FVTPL and amortised cost, or vice versa, if and only if the entity's business model objective for its financial assets changes so its previous model assessment would no longer apply.

If reclassification is appropriate, it must be done prospectively from the reclassification date. An entity does not restate any previously recognised gains, losses, or interest.

Disclosures

IFRS 9 amends some of the requirements of IFRS 7 - Financial Instruments: Disclosures, including added disclosures about investments in equity instruments designated as at FVTOCI.

Financial Liabilities

IFRS 9 does not address financial liabilities. IASB has begun the process of giving further consideration to the classification and measurement of financial liabilities and it expects to issue the final requirements for financial liabilities by the end of 2010.

Atul Shukla – Audit Partner

CONTENTSCONTENTS

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Jochen Hundt LL.M.Member of JCA International

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Exporters acquainted with the legal situation of the Middle East know that whoever intends to operate actively in the markets of the oil-rich monarchies along the Gulf is often restricted or even prevented by law from distributing his products himself. Indeed, the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) have enacted legislation which forces foreign producers to appoint a local agent or distributor who takes in hand the marketing, distribution and after-sales service for the imported line of products. In many cases the agent or distributor must either be a local individual or a trading company owned by locals, in most cases at 100%.

Commercial agencies are lucrative business and the legislation in place often aims at protecting the agent to a maximum extent. Agent-friendly statutes continue to be in force throughout the GCC, despite the accession of all GCC member countries to the WTO. The existence of such statutes was certainly justified in the 1960's, at a time when indigenous village traders had to face the economic might of the North American and European industries, but the situation today has changed to the point that the turnover of some GCC trading houses exceeds the turnover of their manufacturing partners abroad. Consequently, the agency legislations of the Gulf are often much criticized, especially by foreign exporters and their organizations. In this context it is worth mentioning that the Kingdom of Saudi Arabia, by virtue of its Commercial Agencies Law of 1962 (Royal Decree no. 11 of 1382H) and the corresponding Executive Regulation, has put into force, and applies until today, the most liberal legislation within the GCC. This characteristic may be illustrated by the following examples:

Unregistered agreements are enforceableAs opposed to the situation in the rest of the GCC, Saudi courts consider and enforce agency and distributorship agreements that have not been registered with the authorities. In fact, even though Article 3 of the Saudi Commercial Agencies Regulation makes registration a duty upon the agent or distributor,

not only are the relevant penalties never applied but also the Saudi judgesdo not make any distinction in applying agency agreements, whether registered or unregistered. Despite the letter of the law, it is in practice fully up to the contractual parties whether or not to register the contract.

KSA: The most liberal commercial agency law of the Gulf…

Partner, Head of InternationalAl-Soaib Law Firm, KSA

Exclusivity not compulsoryThe Saudi Commercial Agency Law does not require a commercial agent to enjoy exclusivity for the contractual territory and the agreed product line. Unlike the situation under UAE agency law a foreign producer has always been able to appoint two or more agents or distributors in Saudi Arabia, even for the same products and the same territory (region, city, etc.). In practice the parties to an agency or distributorship agreement sometimes decide to make the principal's right to appoint another agent subject to the agent fulfilling a number of contractual obligations, in particular the compliance with a minimum turnover scheme.

No minimum duration Other than its Kuwaiti counterpart, the Saudi Agency Regulation does not require the parties to agree on a minimum contractual term. In the 1990s, a reform of the Saudi Agencies Law was under discussion, which included a minimum contractual term of 5 years in case the agent or distributor had to invest in warehouses, showrooms or workshops. However, these amendments have never been enacted by the Saudi government. The parties to an agency agreement are therefore free to convene on any duration. Allowed are even indefinite term agreements, which can be cancelled at any time by simple notice, provided that the contract provides for an initial defined term (for example 1 year after which the agreement becomes indefinite).

No minimum compensation in case of termination In the majority of the GCC countries, and especially in the United Arab Emirates, the rights of the agent or distributor are something tantamount to a title of ownership over the agency or distributorship. This means in practice that any principal who terminates or even refuses to renew an agency agreement for a reason other than a serious breach by the agent of the terms and conditions of the contract is considered by law to be guilty of an abuse of rights and is therefore liable to pay the agent compensation at several times the average yearly turnover. Even though in Saudi Arabia, too, it is not always easy to change one's agent or distributor the law does not restrict the contractual freedom of the parties with regard to the issue of compensation.

MERGERS & ACQUISITIONS

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Mr. Anees PaliwalaAuditor Jitendra Chartered Accountants

Items

Meaning / Nature

Shareholding Pattern

Reconstruction

New companies Substantially remain the same.

Full/Partial transfer of one or more companies to another, including merger.

Amalgamation

Same shareholders, but different rights.

Merger

Dissolving one or more entities to form or get a bs o r b e d i nto a n o t h e r company.

Transfer or sell outright on a going concern basis with all its worth.

Acquisition & Takeover

Form and nature can change substantially.

Same shareholders, but different rights.

Winding up of an existing company and transfer to a new company in its place.

The growing ambition of the dynamic business community introduced the world to a term known as Merger and Acquisition or simply M&A. While this term has brought some down to their knees, for others it has left behind a string of smiles. Though the term M&A is used on a daily basis in the corporate world, there still remain a few aspects around it that are either not completely understood or used incorrectly. Herein are a few facts that shall help simplify the Merger & Acquisition riddle:

Guide to basic terms and their definitions:Amalgamation - Blending together of two or more existing undertakings.Slump Sale - Sale of a business as a going concern.Itemized Sale - Sale of a business as an individual asset.Merger - Amalgamation of existing businesses.Subsidiarisation - Sale to a subsidiary.Share Purchase - Secondary market/negotiated purchase of shares.Fresh Issue - Issue of fresh shares (Preferential Issue).Takeover by Reverse Bid - Wherein a smaller company gains control of a larger company.Buyout - An acquisition by the incumbent management of the business where it is employed. A full buyout is a concept still popular in OECD countries.

The terms amalgamation, merger, acquisition and reconstruction are generally used interchangeably; however, they are quite distinct. Each of them has a varying effect on the shareholding pattern of the business and its nature as explained below:

While mergers and acquisitions have been dreaded by most corporations and been viewed as hostile attempts to take control over companies, they do have various benefits as well. M&As offer a unique opportunity to those seeking horizontal growth in large markets along with optimum utilization of resources. They can also be used for vertical combinations that result in reduced tax burdens and economized costs. M&As can be used to diversify businesses, attract foreign investors and combine the managerial, financial and human resources of two entities. In case of financial restructuring and tax planning, they can be used to improve Dividend Yield, earnings, book value of entities and cash flow of entities.

The accounting treatment for a merger and an amalgamation differs as:Method of Valuation in case of Merger & Acquisition:Valuation of the transferor entity can be done by the Discounted Cash Flow (DCF) Method, i.e., discounting the estimated future cash flows of the entity (less) value of debt and other obligations as estimated.

Method of Accounting in case of Amalgamation:

Pooling of interest Purchase Method

We invite reader's queries for audit related issues on email: [email protected]

In Financial statements post Amalgamation, books need to record a line wise addition of all the assets and liabilities of all entities, except Share Capital.

Any excess realized or loss suffered is to be adjusted by way of Reserves.

For statutory reserves, an Amalgamation Adjustment a/c is to be opened

Amortize the goodwill arising out of such events over a period of 5 years.

Assets and liabilities are to be recorded in books on the value at which they are taken over by the transferee company.

Any surplus over Net Assets is to be debited to Goodwill and loss suffered is to be credited to Capital Reserve.

Reserves and surplus shall not be transferred to the purchasing company.

Treatment of Statutory Reserves and Goodwill shall remain the same as in pooling of interest method.

The recent amendments in the Indian Trademark Rules have brought the Trademark Register Office of the Controller Gen-eral of Patents, Design & Trademarks, India one step closer to achieving complete transparency. The amendments proposed previously by the Government of India in the Trademark Rules 2002, have now been implemented as Trade Marks (Amendments) Rules, 2010 as of May 2010. As a result of these amendments ,the public will now have full access to the complete details regarding pending Trade Marks Applications, Examination Reports, E-Register of trademarks, Copy of Applications, Opposition details, Registered Trademarks, Copy of Trademark Certificates, etc.

Major changes by way of amendment have been introduced to the Fourth Schedule, which includes the adoption of the 9th Edition of the Nice Classification, as per which there will be adoption of all 45 International Classes. Earlier, class 43, 44 & 45 were merged in class 42; however, from May 2010, separate applications can be filed for each of the services such as Scientific and Technological services, Services for providing food and drinks, Medical services, Legal services, etc.

Another significant change has been regarding the insertion of Rule 62(3), which states that if the Registrar is satisfied with a claim of the Registered Proprietor and supported by evidence that the registration certificate has not been received by him, he may subsequently issue a duplicate registration certificate without any additional cost.

AMENDMENTS IN THE INDIAN TRADEMARK RULES

Mr. Roouchak Saxena Legal Consultant Intellectual Property Services

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However, it further states that no such duplicate certificate will be issued where a request is received after the expiry of the renewal, registration or restoration period of the registered trademark. The Trade Marks (Amendments) Rules, 2010 promise to bring about changes in the Trademark process in India. As a result of these amendments, various Trademark registry offices, like the Delhi Trademark Registry have geared up the examination process and time frame for registration.

Hence, the Trade Marks (Amendments) Rules, 2010 can definitely be viewed as a step in the positive direction by the Indian Government for strengthening the rules regarding trademarks in the country.

The Most Liberal Commercial Agency Law of the Gulf ...From Page 6

Thus the courts are bound to enforce any clause restricting or even excluding compensation to be paid to the agent in case of termination. It is true that in case of an agency dispute, many judges tend to encourage the parties (and especially the foreign principal) to agree to an “amicable” settlement, which most of the time includes some compensation amount to be paid to the agent, and to delay the judgment. Nevertheless, at the bottom line, the Saudi judge has no other choice than to enforce a freely agreed exclusion or limitation clause. The best solution in practice, as per the mindset of the courts, is often a clause that makes compensation subject to the agent complying with a list of important contractual obligations, which have to be spelled out in detail.

Saudi Arabia has been a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1994. By virtue of the convention, arbitral awards rendered in any signatory country are legally enforceable in the Kingdom. Also the Model Agency Contract of the Saudi Ministry of Commerce provides that disputes may be referred to the courts or alternatively to “local or foreign” arbitration. In practice, however, there seems to be still no established track record of foreign arbitral awards that were actually enforced in Saudi Arabia.

The situation is different with arbitral awards rendered in Arab and specifically GCC countries (such as by the DIAC) because the respective convention of the States of the Arab League and the respective GCC Protocol are better being implemented in the Kingdom. Nevertheless, to ensure swift enforcement the best forum selection in the interest of the foreign principal is usually 'Saudi Commercial Courts' in combination with 'Saudi law'.

In April 2007, Saudi Arabia implemented a provision of the WTO accession treaty which allows foreign investors to hold up to 75% of the capital of distributor companies. However, a minimum capital investment of SAR 20 million is required from the side of the foreign investor alone, plus the respective amount by the local partner. The workforce of the company must be “saudiized” at 75%. Commercial agencies, to the contrary, are still part of the so-called 'negative list' i.e. foreign investment is not permitted in this sector.

Foreign Arbitration

Foreign Investment

We invite you for any queries for trademark on email: [email protected]

INSIDE JITENDRA GROUP

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CA Jitendra Gianchandani and Mr. Roouchak Saxena meet Dr. Khaled Abdullah Al-Yaqout, Chairman of Dr. Khaled Al-Yaqout Law Firm, Kuwait during their visit to JCA International head Office in Dubai on August 26, 2010.

CA Jitendra Gianchandani, CA V. Raju and Mr. Manish Gupta meet Mr. Sahidur R a h m a n , M a n a g i n g D i r e c t o r , Systemrevisjon AS, Norway and Mr. Deepak Dutta, Managing Director Okonomi Regnskapsbyra AS, Norway- new JCA International members during their visit to it’s Head Office Dubai on July 18, 2010.

Marilyn Salon, is JCA’s new company Accounts Assistant. Ms. Salon, graduated with a Bachelor of Science degree in Accountancy and has been working in the Dubai service industry for over 3 years. Ms. Salon will provide accounts support to Jitendra Consulting Group Audit Division and will be positioned at the company’ head office in Dubai.

Meeting JCA International Members

JCA hosted a get together for its staff to network socially & get acquainted with each other on November 3, 2010

CA Jitendra Gianchandani, CA V. Raju and Mr. Manish Gupta with Mr. Jochen Hundt – Partner, Al Soaib Law Firm, Saudi Arabia and member of JCA International during his visit in Dubai on November 9, 2010

APPOINTMENTS

Daivajna K.N. Somayaji, Vedic Scholar, Corporate Guru and Member of the Central Sanskrit Board Government of India, visits JCA headquarters on September 2010.

CA Jitendra Gianchandani and CA V. Raju presented Trademark Registration Pocket Book Middle East, 2010 to Mr. Sanjay Verma, Consul General of India at the Indian Consulate, Dubai on July 2010.

We invite reader's queries for audit related issues on [email protected]

CONTENTSDOING BUSINESS IN UAE UPDATE

SEE PAGE 11

Manish Gupta Manager Business Advisory Services

Creative City, launched by Fujairah Media as an alternative to the Dubai Media City, aims at being a "one-stop-shop" free zone. Its purpose is to attract regional, national as well as International broadcast, TV and radio service providers to "Fujairah" in the "United Arab Emirates" , while providing them with media related services. The primary objective behind the launch of Creative City is to provide a place where media-oriented companies will be able to set up their operations easily, as they will be given access to all necessary licenses, infrastructure, technologies and associated services. Fujairah also has some obvious advantages, such as lower costs of operating licenses and lower costs of living, which could be decisive factors for budget driven companies and agencies.

The mission of Creative City is to provide and promote a vibrant environment of creativity and innovation for individuals and businesses in media, communication, design and technology. Creative City has seven zones dedicated to different areas of creative activity, namely: Audio Visual, Publishing, Training, Theatrical Arts, Design, Technology and Cinema. The activities which will be available for companies/establishments in Creative City, Fujairah are categorized as under:

Each zone has been planned keeping in mind the services and features that would be r e q u i r e d b y t h e practitioners of these activities. There are also special zone wise sections for freelancers operating in the core activity of each zone. The activities that will

be available for Freelancers in Creative City, Fujairah are categorized as follows:

Actor, Animator, Artist, Audio / Sound Engineer, Camera-man, Choreographer, Commentators: Radio, Events, Sports, Television, Compére: Stage, Radio, TV, Composer, Content Provider, Copywriter, Costume Designer, Creative Director: Advertising, Film, Critic: Music, Film, Theatre, Director: Film, Television, Music, Theatre, Editor: Publishing, Editor: Video & Film, Events Planner, Graphic Designer, IT Technologist, Journalist, Lighting Technician, Market Researcher, Media Representative, Music Director, Musician, New Media Specialist, Photographer, Photojournalist, Presenter (TV/Radio), Print Media Specialist, Producer, Reporter, Scriptwriter, Set and Exhibit Designer, Special Effects Producer, Writer, Translator, Web Designer, Audio & Visual.

1 USD=AED 3.67

The going concern assumption is a fundamental principle in the preparation of financial statements. International Financial Reporting Standards (IFRS) and International Accounting Standard (IAS 1) - "Presentation of Financial Statements", requires the management to make an assessment of an entity's ability to continue as a going concern. The International Standard on Auditing (ISA 570) - "Going Concern", establishes the relevant requirements and guidance. The management's assess-ment of an entity's ability to continue as a going concern is a key element of the auditor's consideration of the going concern assumption.

IAS 1 and ISA 570 acknowledge that entities with a history of profitable operations and ready access to financial resources may not need a detailed analysis to support the going concern assumption.

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Auditor Jitendra Chartered AccountantsMr. Tariq Afroze

We invite reader's queries for business consultancy related issues on [email protected]

Creativity City- Fujairah

The summary of costs for setting base in the Creative City is as follows

Marketing

Media Support Services

Audio & Visual Media Consultancy

Audio

New Media

PublishingEvent ManagmentBusiness Information

Audit Consideration in Respect to a Going Concern in the Current Economic Environment

Disclaimer:

The information conveyed in this newsletter are the individual opinions of the respective authors and is not combined opinion of Jitendra Consulting Group

Jitendra Consulting Group’s Office

Head office: DubaiSuite 3006, 30th floor

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Mobile: +91 9224748096Email: [email protected]

Audit Consideration in Respect to a Going Concern in the Current Economic Environment ....From page 10

Directory

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Group Entities

Jitendra Chartered AccountantsJitendra Business ConsultantsJitendra Intellectual Property

Jitendra Corporate Finance ServicesJCA Property Consultants

JCA Human Resources ConsultantsJCA Consulting Pvt. Ltd, IndiaJCA Consulting (U.K.) LLP, U.K.Jitendra Int’l Law Firm Limited

K&K CSR Foundation Stride Consultancy Limited

However, the effect of the credit crisis and economic downturn is likely to be that such an approach will no longer be appropriate for many entities. Issues surrounding liquidity and credit risk may create new uncertainties, or may exacerbate those already existing.

Even many well respected entities with a long standing history of profits and availability of credit may find it difficult to obtain or renew financing, either at all or on comparable terms. Further, entities that have typically relied on extensions of debt payments or waivers of debt covenants at year end may find that these reliefs are no longer available from their lenders. In addition, the economic crisis may undermine the previous assumptions about profitability.

Consequently, entities that have not previously found the need to prepare a detailed analysis in support of the going concern assumption may now need to give the matter further consideration. Matters such as owner-manager support may become even more pertinent in the current economic environment. Neither management nor the auditor can predict future events or conditions that may cause an entity to cease to continue as a going concern. The unexpected severity, speed and consequences of the credit crisis illustrate this fact extremely well. It is for these reasons that ISA 570 states that the absence of any reference to a going concern uncertainty in the financial statements or the auditor's report cannot be viewed as a guarantee that future events or conditions will not result in the entity ceasing to continue as a going concern. Nevertheless, the current economic conditions do not change either management's or the auditor's responsibility relating to the going concern assumption. There is no doubt that the events of the past year and the outlook for the future present challenges that will need to be considered by the management and auditors alike in meeting those responsibilities.

One major effect of the credit crisis and economic down-turn is the lack of available credit to entities of all sizes. Turmoil in the banking sector has led to a general tightening of credit, which may have a pervasive effect on an entity's ability to continue as a going concern. In addition, as an entity's financial health changes, contractual terms in loans and other obligations, including debt covenants and guarantees, and an entity's compliance with such terms, are likely to be under greater scrutiny from lenders, and also from management and auditors

Based on the audit evidence obtained, the auditor concludes whether management's use of the going concern assumption in the preparation of the financial statements is appropriate and determines what type of opinion is to be issued in the circumstances. ISA 570 provides further guidance and examples of wording to be used in the auditor's report, depending on the circumstances.

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JCA News 2011: Winter Edition

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